All-inclusive Emissions Trading System for road: more realistic start date

All-inclusive Emissions Trading System for road: more realistic start date

IRU — 2022-12-20

News from Brussels

After intense negotiations, the Council of the EU, the European Parliament and the European Commission struck a deal last weekend on an Emissions Trading System (ETS) for buildings and roads (ETS II) that sees reason prevail, having taken on board the road transport industry’s critical recommendations. 

The negotiations began with the European Parliament and Council holding different positions that included impractical provisions, such as limiting the ETS system to commercial users and a start date targeting 2024, even though alternatives to carbon-emitting technologies and the related infrastructure will not be ready.

IRU EU Advocacy Director Raluca Marian said, “Although it’s not ideal, the legislators’ compromise on ETS II shows that pragmatism can prevail, even if the debate gets heated. To reach this position, we have come a long way, especially if we look at earlier proposals with unrealistic start dates or impractical differentiations between private and commercial vehicles for ETS II purposes.”

An all-inclusive ETS II – a big win for the Council 

As IRU has repeatedly stated, an all-inclusive ETS II is the only acceptable approach. An ETS II that only covers commercial vehicles would send a counterproductive signal to EU citizens and businesses against the vital role of public transport, collective mobility and efficient goods transport in greening our roads. It would also be hard to enforce. 

 “We are glad to see that the European Parliament’s negotiators listened to reason and changed their position, which was to apply ETS II to just commercial vehicles. Also including private vehicles is the only solution for a functional ETS,” said Raluca Marian.

A more realistic start date

Compared to 2024, a start date initially supported in the European Parliament, or even 2025 and 2026, as originally proposed by the European Commission, the compromise to launch ETS II in 2027 is considerably more realistic. IRU particularly appreciates the additional inclusion of a clause to postpone ETS II until 2028 if energy prices are exceptionally high. 

IRU also welcomes the insertion of a price cap for ETS allowances, combined with a mechanism to ensure that prices cannot rise too sharply, even if they’re below the price cap. 

“The compromise reached demonstrates the progress made by EU legislators in understanding the influence that external circumstances, such as high energy prices, have on the ability to cope with ever-rising costs. Moving the start date to 2028 if energy prices are high, combined with a price stabilisation mechanism to deal with the exploding prices of ETS II allowances, are good additions to the legal text,” added Raluca Marian.

No earmarked budget, but double-ETS schemes avoided 

With the ETS II funds split between the EU fund and Member States’ budgets, it has been a battle to get an agreement on how to use the funds. Despite Member States’ strong opposition to put a label on their share of the funds, the European Parliament has won in this case. There will be no earmarked budget for road. But at least the funds, be they EU or national, can be used only for efforts linked to decarbonisation and climate change. 

The road sector’s call to charge carbon emissions in the most efficient way is reflected in the legislators’ agreement to apply only one scheme: ETS II will generally supersede existing national schemes unless national schemes set higher prices for allowances. This eases transport operators’ concerns that carbon emissions could be charged twice.

“It is doubtful that the basic conditions – such as rolling out charging/refuelling infrastructure and adequate power grids across the EU as well as scaling up the production of vehicles – for a massive shift to zero-emission heavy-duty vehicles will be in place by 2027, or even 2028. Hence, to a large extent, ETS II will act as a penalty for road transport operators that lack the possibility to make the shift. However, the compromise reached by the legislators is much better compared to what we had before. It remains to be seen if the European Parliament’s Plenary and the Member States will back the deal,” concluded Raluca Marian.