MNI: EU Likely To To Limit Fuel Price Hit From ETS2 CO2 Scheme

The European Parliament is likely to take steps to reduce the impact on consumers and companies of ETS2 carbon pollution charges set to be imposed on residential heating, road transport and small businesses from 2027, following heavy lobbying by member states including Germany worried by a potential surge in fuel prices, European officials and parliamentarians told MNI.

A call by a group of 16 countries for a significant increase in pollution permits when carbon prices rise over a certain limit in for the heating and transport sectors has garnered significant support in the parliament, officials said. A smaller group of CEE countries, including Poland, has called for ETS2, a major extension of the bloc’s emissions-trading scheme which is likely to significantly add to inflation, to be delayed until 2028.

While Germany has not signed up to the group of 16 and backs ETS2, it is also supportive of the need to help consumers, officials said, adding that it seemed inevitable that some measures will be taken to mitigate the impact of the new regulation.

The treaty establishing Germany’s governing coalition contains a general endorsement of the emission trading system, including ETS2, and has a Fuel Emission Allowance Trading Act (BEHG) in place, already incorporating aspects of the extended carbon pricing scheme, German CSU MEP Markus Ferber noted.  

INFLATIONARY IMPACT

But while it might be in Germany's interest for the bloc as a whole to implement ETS2 to level the playing field, the coalition agreement also calls for measures to cushion the blow to consumers. 

"I would not rule out that there will be tweaks around the margins and/or accompanying measures,” said Ferber, referring to ETS2.

ETS2 will have a potentially significant inflationary effect if left undiluted, another EU source noted. (See MNI SOURCES: Data-Led ECB To Hold A Cut In Reserve If Needed)

For a carbon price of EUR48 per tonne of CO2, a European Commission impact assessment accompanying the revision of the ETS Directive forecast a fuel price increase of EUR0.11 per litre of petrol and EUR0.13 per litre of diesel. Other studies forecast a fuel price increase of up to EUR0.50 due to the ETS2 by 2030.

Nonetheless, the official said, the scheme is likely to persist for now.

"I do not see sufficient support yet, and the Socialists and the Greens of course would oppose any scrapping,” the official said, noting that European Commission President Ursula von der Leyen needs the support of those groups.