EURACTIV — 2023-04-14
News from Brussels
Ahead of a vote on the EU’s carbon market reform, Green lawmaker Michael Bloss reassured consumers that carbon prices will not go above the €45 limit, citing a political commitment by French president Emmanuel Macron.
On 2023 April 18, the European Parliament will vote on a reform of the EU’s carbon market, the Emissions Trading System (ETS), following a deal struck between EU institutions in 2022 December.
The agreement includes the introduction of a new carbon surcharge for fossil heating and motor fuels, such as petrol, diesel, heating oil, and gas, as of 2027.
Ahead of the vote, German lawmaker Michael Bloss (Greens/EFA), who negotiated the file for the Green group in the EU parliament, sought to quell fears that prices for those goods will increase drastically.
The new carbon price for heating and transport fuels “will not be introduced until 2027 and then the price will be capped for five years, until 2032, at €45,” Bloss told journalists on 2023 April 13.
However, experts doubt whether this price limit will work in practice.
In theory, once the price hits €45 a mechanism would automatically increase the availability of emission certificates – the key means to lower the carbon price.
However, this may not be sufficient if demand for emitting activities, such as driving or heating with fossil fuels, is high, the experts said.
“I do think this is something that is not so easy to get around,” Bloss said, in reference to the €45 limit. “Politically, Macron has always said, he has always promised, he will cap the price at €45,” he added.
“So this murmuring in Germany that ‘none of that works’, I wouldn’t be so sure, because it’s quite political,” Bloss said in reference to the statements by leading experts on carbon markets, such as Michael Pahle of the Potsdam Institute for Climate Impact Research (PIK).
“The question of energy prices is on everyone’s lips right now. And that’s why I don’t believe that you can say this €45 [price] will not be maintained,” Bloss concluded.
French liberal EU lawmaker Pascal Canfin, who is a member of Macron’s party and is said to be close to the French President, said in 2022 December that only with the inclusion of the €45 “price ceiling”, the introduction of the new carbon price would be “politically acceptable”.
EURACTIV reached out to the French government for comment, and did not receive a reply by the time of publication.
The price surcharge on fossil fuels such as heating gas, petrol and diesel under the EU’s new carbon market as of 2027 could be well above the €45 limit EU institutions aim for, experts say, blaming lawmakers for creating false expectations.
No hard price cap, otherwise it wouldn’t be a market
Similar statements were made by Dutch lawmaker Mohammed Chahim, who took over negotiations on the file for the centre-left S&D group.
“The goal of the price stability mechanism is to keep the price below €45, and if the 20 million extra allowances do not deliver on this objective, extra allowances will be released until the price is stabilised,” Chahim told EURACTIV.
On top of that, “the ETS2 will only enter into force when general energy prices are low enough. If they are already high, we will postpone the implementation because then it would overshoot its objective,” Chahim said.
Finally, there would also be additional mechanisms in place which are similar to the ones in the existing carbon market for industry and electricity generation.
However, “there is no fixed price ceiling, then it would not be a market mechanism,” Chahim said.
EU legislators agreed early on 2022 December 18 to introduce a carbon price on buildings and road transport fuels, with a new €87-bn social climate fund established in parallel to cushion the impact on households and help them invest in green solutions.
Member states prepare their citizens
Peter Liese of the centre-right EPP group, the parliament’s chief negotiator on the file, told EURACTIV that responsible politicians and national governments should “prepare the population for the fact that fossil fuels will be scarce and expensive”.
Asked how he thinks EU countries should do that, Bloss championed the idea of a “climate bonus”, a lump-sum payment to all citizens, returning all revenues from the new price surcharge.
“EU member states must prepare their citizens for the upcoming price increase of oil and gas by implementing a European climate bonus,” Bloss told EURACTIV.
“This instrument distributes the revenues from the CO2 market fairly to the citizens. The rich, who cause more CO2, pay more, while people with low incomes benefit,” he added.
“Such a climate bonus also corrects the social imbalance of the carbon market,” Bloss said.
Asked the same question, centre-left lawmaker Chahim said that “there is no need to already assume price increases for households”.
“All revenues should be spent on compensating households for higher prices, partly through the social climate fund and partly through the member states themselves,” he added.
Chief negotiator Liese, meanwhile, stressed that national climate policies, by reducing CO2 emissions and thus the demand for emission certificates, can help to keep prices low.
“I am against too detailed regulations,” he told EURACTIV.
“However, we should not demonise the heat pump, energy-efficient renovation or the electric car, but rather highlight the opportunities and give people targeted support,” he added.