European Parliament has approved a measure to remove the price cap on carbon allowances for fuels, a move that strengthens the EU Emissions Trading System. The cap had limited how high carbon prices could go for transport and heating fuels, shielding consumers from full market costs. With the cap gone, carbon prices can rise to reflect actual supply and demand, creating a stronger incentive for businesses and households to cut emissions. The decision is part of a broader reform of the EU carbon market, which now includes emissions from buildings and road transport. While this could lead to higher fuel prices, it also accelerates the business case for clean alternatives like electric vehicles and heat pumps. The next step will be watching how the market responds and whether the EU's social climate fund effectively cushions vulnerable households.
