Climate Plan for EU’s Transport Won’t Cut Carbon Far Enough

(Bloomberg) -- A plan to include pollution from European transport and buildings in the world’s biggest carbon market won’t bring the emissions cuts needed to hit strict climate targets.

If oil companies were required to buy carbon allowances for the diesel and gasoline they sell to drivers the cost of filling up vehicles would also increase, according to a study by Cambridge Econometrics.

The European Union’s carbon market is the cornerstone of the region’s climate policy, imposing pollution limits on power producers and manufacturers.

Ursula von der Leyen, president of the EU Commission, floated last year an option of expanding the cap-and-trade program into road transport as part of her Green Deal strategy for Europe to become climate-neutral by 2050.

“Putting cars and trucks in the existing EU carbon market won’t work for the environment, people or the economy,” said Carlos Calvo Ambel, senior director for analysis at the lobby group Transport & Environment. “EU vehicle CO2 standards and greener taxes at national level are what’s needed to decarbonize road transport.”

The findings highlight the challenges for the EU to agree how to tackle the need of faster emissions reductions. The European Commission is currently looking at tightening the bloc’s 2030 carbon-reduction goal to 50-55% compared with the existing target of 40% from 1990 levels.

Reducing pollution from transport, which accounts for almost a quarter of European greenhouse-gas emissions, has so far been one of the most difficult tasks for policy makers. While pollution from other sectors is decreasing, pollution from cars and truck have continued to rise.

Extending the EU carbon market to include road transport would deliver no additional emissions cuts in 2030 and minimal savings in 2050 because the sector is “relatively unresponsive” to the carbon price, according to the Cambridge Econometrics study. At the same time, industry and power producers in the market would have to cut their pollution even more aggressively to compensate.

That would drive up the price of EU carbon allowances to nearly 90 euros ($101) a ton later this decade, compared with the current price of about 27 euros a ton.

Making fossil fuels more expensive will be important in the longer run, when policy makers will seek to discourage the last remaining combustion-engine vehicles. But any increases in carbon and fuel taxes will need to be fair and gradual, Transport & Environment said.

©2020 Bloomberg L.P.