MNI BRIEF: EU Ministers Push Back ETS2 Trading Scheme To 2028

European Union energy ministers have agreed to delay the extension of the ETS2 emissions trading system by one year until 2028, in negotiations which also watered down 2040 climate targets, officials told MNI.

The agreement between EU capitals goes beyond the European Commission’s initial proposal to mitigate the impact of ETS2 on energy prices by reducing the price of CO2 emissions permits and spreading its introduction between 2027 and 2028. It will now go to the European Parliament and for trilogue talks.

European Central Bank policymakers are closely monitoring developments around ETS2, which is expected to add 0.3 percentage points to euro area inflation in 2027 without any mitigation.

ECB president Christine Lagarde last week minimised the importance of ETS2 for the Bank's future policy decisions, though she indicated that the Bank only expected action to mitigate its impact rather than a full delay. (See MNI: EC Autumn Inflation Forecast To Assume Mitigated ETS2)