EU Vows to Shield Households From CO2 Market-Linked Price Hike

The European Union’s climate chief pledged measures to protect the most vulnerable households during the transition to a cleaner economy, seeking to allay concerns about a potential expansion of the bloc’s carbon market into transport and heating.

The European Commission, the EU’s regulatory arm, is considering a proposal to apply emissions trading to those two sectors as part of a broader package to meet stricter climate targets for 2030. Member states, businesses and consumer associations have voiced concerns that such a move would raise fuel prices.

“If we do take this step, and if households face growing costs as a result, we will ensure that the social mechanism, a climate action social fund, is in place that can compensate for any possible adverse effect, especially for our most vulnerable citizens.,” said Commission Executive Vice President and climate chief Frans Timmermans. He was speaking at a session of the European Economic and Social Committee.

The EU is seeking to reduce greenhouse gases by at least 55% by 2030 from 1990 levels and achieve net-zero emissions by 2050, according to an ambitious strategy known as the Green Deal. On July 14, it plans to unveil stricter climate policies to meet the goal for the next decade in an overhaul that would affect every area from energy to trade and transportation. For the bloc’s carbon market -- which currently imposes emissions caps on around 12,000 installations owned by manufacturers, utilities and airlines -- this would be the biggest reform in its 16-year history.

Extending emissions trading to include transport and heating fuels would mean creating an adjacent market, with no price link to the existing EU Emissions Trading System. Part of the revenues generated by the new carbon trading program could be put into a dedicated fund that national governments could use to compensate vulnerable citizens for the cost of the transition, according to Timmermans.

“If they receive financial assistance they could be enabled to make the switch to clean alternatives, like zero-emissions heating and cooling or electric cars, and then experience the financial benefits of that switch sooner as well,” he said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.