EU Says Carbon Market Cash Can Ease Cost of Energy Crisis
(Bloomberg) -- The European Union’s red-hot carbon emissions market could be used to mitigate the impact of soaring energy prices on the most vulnerable consumers, EU Energy Commissioner Kadri Simson said.
Revenue from permit auctions in the bloc’s Emissions Trading System jumped to more than 20 billion euros ($23 billion) this year as the price of pollution soared with gas and power prices. While national governments are obliged to use half of the funds for climate purposes, they are also allowed to use them to financially support middle- and low-income households, Simson told Bloomberg News in an interview.
“Any measures, of course, need to be in line with the state aid and internal market rules, but there is no limit to how much EU ETS-related funding can be spent on addressing social impacts,” she said. “In the current context of higher than anticipated revenues, this can be done without jeopardizing investment in clean-energy technology and innovation.”
European governments are scrambling to soften the impact of the energy crunch on consumers as the bloc prepares for the world’s most ambitious climate plan. Political will is being tested by the threat of soaring household power bills weeks before winter has even started, a situation that could spark a backlash against the transition to cleaner energy.
The crisis is forcing its way up the EU political agenda. The bloc’s leaders will discuss the recent price hike at their meeting in Brussels on Oct. 21-22, according to an EU document seen by Bloomberg News.
Member states have already started turning to unorthodox tools to cushion the blow from the crunch. Netherlands amended the country’s budget to include 500 million euros to lower energy costs for companies and households. Spain wants to slap a windfall tax on power utilities and use 900 million euros from the EU ETS to help put a lid on prices.
“The current increase in energy prices has little to do with our climate policies and much more to do with our dependence on volatile foreign fossil fuels,” Simson said. “It would be extremely unfortunate if we draw the wrong conclusions from the current situation and stall policies that would actually help us to tackle this dependency, stabilize prices and be better positioned for the future.”
The price of EU carbon permits more than doubled over the past two years as the bloc moved to tighten its climate policies. It jumped to record 65.77 euros a ton on Tuesday.
The European Commission, the bloc’s executive arm, gave the EU ETS a greater role in the shift away from fossil fuels under a set of reforms unveiled in July to speed up pollution cuts. The proposal that all revenues from go vernment sales of carbon permits be used for climate-related purposes covers support for vulnerable consumers, Simson said.
The EU also wants to set up a new 72 billion-euro social fund, financed by revenues from the planned extension of emissions trading to heating and transport fuels from 2026. Its aim will be to shield the poorest citizens, micro-enterprises and transport users in the shift away from dirty energy.
To help tackle the immediate consequences of the energy crisis, the Commission is working on guidance for national governments on how to design their intervention so that it is in line with the bloc’s competition rules. Energy policy in the EU remains largely in the hands of member countries.
“In the short term, member states can for example adjust the taxes and levies on energy, provide direct support to vulnerable consumers and small companies and speed up the use of the EU’s recovery funds,” Simson said. “In the longer term, accelerating the deployment of renewables and improving our energy efficiency will mean we’ll be much less affected by volatile fossil fuel prices.”
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