The European Union agreed on stronger measures to control prices in its new carbon market, the European Parliament said early on Thursday, responding to governments’ concerns that the emissions-cutting initiative could increase fuel bills.
Negotiators from EU countries and the European Parliament agreed that if the cost of permits in the new carbon market exceeds €45 ($52) per metric ton of CO2, then 40 million permits will be released into the market from a “stability reserve” to regulate supply, up from a previous 20 million.
The reserve can be triggered twice per year, under the changes agreed on Wednesday evening, meaning a total of 80 million extra permits can be added each year.
The reserve will also be extended beyond 2030 rather than expiring that year.
The EU’s second emissions trading system (ETS) will impose a price from 2028 on CO2 emissions produced by heating and transport fuels to encourage a shift to electric vehicles and cleaner home heating systems.
It will require fuel suppliers and distributors to buy CO2 permits from the ETS market to cover their emissions.
Proceeds from the scheme will be spent on helping people pay bills, buy electric cars and invest in energy-saving home renovations.
Known as ETS2, the upcoming scheme for heating and transport emissions is separate from the EU’s existing emissions trading system, which covers power plants and heavy industries.
The stricter measures to regulate ETS2 prices follow warnings from governments, including France and the Czech Republic, that the new program would risk stoking opposition to climate change policies if it was perceived as raising consumers’ fuel bills.
Revisions to the plan include a more gradual release of permits from the market stability reserve, with smaller volumes becoming available once permits in circulation fall below 260 million, instead of releasing 100 million permits at once when the total falls below 210 million, the parliament said.
The agreement must be endorsed by the European Parliament and EU member states before entering into force in 2028.
The European Commission is expected to present a wider review of ETS2 in July.
($1 = €0.8666)
