How to make the new emissions trading system work for consumers by Elisabetta Cornago, 4 March 2022 Extending the Emissions Trading System to buildings and road transport can cut emissions and help poor households if all revenues are devoted to income support and green investment. In the EU, not all CO2 emissions are considered equal: heavy industry and electricity producers face an EU-wide carbon price under the EU Emissions Trading System (EU ETS), but road transport and the heating of buildings do not. All EU member-states tax fuel, but levies vary. And some member-states have their own national carbon taxes. This is about to change. The EU’s ‘Fit for 55’ programme – a set of policies to cut carbon emissions by 55 per cent by 2030 relative to 1990 levels – includes a proposal to create a new system to cap and trade carbon emissions from two major laggard sectors, road transport and buildings, which account for about 25 per cent and 15 per cent of EU-wide greenhouse gas emissions respectively. (I have previously written about the proposed reform of the existing ETS here.) Manufacturing and energy industries, currently covered by the EU ETS, have cut greenhouse gas emissions since 1990 by about 40 per cent, while decarbonisation in the commercial and residential building sector has not been as fast, with emissions reductions below 30 per cent. However, road transport has increased emissions by almost 30 per cent (see Chart 1). The new ETS aims to reverse that trend in transport and accelerate decarbonisation in buildings, cutting combined emissions from these sectors by 45 per cent by 2030 relative to 2005 levels.
CER INSIGHT: How to make the new emissions trading system work for consumers 4 March 2022
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