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CO2 emissions: EU agreement, the ETS system extends to transport and heating. 86 billion fund

Agreement reached on the CO2 emissions market. It will also be extended to shipping, transport and building heating companies. When it clicks and how prices will react

CO2 emissions: EU agreement, the ETS system extends to transport and heating. 86 billion fund

An agreement has been reached on the reform of the trading system CO2 emissions in Europe. After a negotiating marathon which began on Friday at 11 and ended in the early hours of the following day, the European institutions reached the agreement on the new CO2 emissions market of the Twenty-seven, the Emissions Trading System (ETS).

The system that since 2005 has put a price on CO2 emissions by putting the "polluter pays" principle into practice. So far it has only been applied to large energy-intensive industries (steel, cement, paper, etc) and to the production of electricity but now it also extends to transport and heating.

CO2 emissions EU agreement: the ETS system also extends to transport and buildings

The ETS, which was born today to be the main instrument of EU climate action for the decades to come, will be larger and will no longer only affect industry and energy. For the first time in the world, a CO2 market will cover sea transport. But the Ets system is also extended to the road transport and warm-up. In the future, it will also affect the incinerators.

Second unprecedented novelty is the creation of a Social fund for the climate with over 86 billion euros, which the EU and the States will have at their disposal to protect citizens from increases in the cost of energy. Fresh resources for structural interventions, but a part can be used to provide real direct aid to families. The third unprecedented is the 'carbon tax' at borders, which will apply the price of EU CO2 to imported products from certain sectors, to allow European companies to compete as much as possible on equal terms with those of countries where climate policies are less stringent, avoiding relocation and job losses.

CO2 emissions: when the new Carbon Tax applies

The agreement on the mechanism that brings the ETS up to the customs offices of the Union was in part already done. But only last night the negotiators of the European Commission, the EU Council and the European Parliament reached agreement on fundamental details to form a coherent framework. One of these was the speed with which the carbon tax would become fully operational, leading to the corresponding elimination of the current anti-relocation system, that of free emission permits. The transition from one system to another will be very gradual, from 2026 to 2034. By 2030, large industry and the energy sector will have to reduce their emissions by 62% compared to when the system started working in 2005. From that year to today, the cut has been almost 43%, but the rate of reduction will have to increase.

Le shipping companies will pay for all their CO2, methane and nitrous oxide emissions from 2026. From 2027, a separate ETS will cover road transport and buildings, i.e. the emissions of the fuels at the pump and the heating fuel. The scheme is designed to affect fuel suppliers and not households, but according to the European Commission's impact assessments increases will be inevitable. If they prove unsustainable, the entry into force of the system will be postponed for a year.

In any case, in 2026 the social fund, 65 billion of EU resources with national co-financing up to 25%. In total, 86,7 billion until 2032. One of the signatures of the ETS revolution is Italian. "Dedicated to the memory of Mauro Petriccione", reads the final line of the EU Council's press release. Unusual and heartfelt tribute from all the negotiators to the European Commission's climate director general, who died suddenly on 22 August last.

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