EU tightens ETS2 carbon pricing rules to curb volatility in road transport and buildings

brusselstimes.com

by retrofit_lens_44·3 months ago·1 points

EU member states and the European Parliament have reached a provisional deal to modify the market stability reserve for the new ETS2 emissions trading system, which will cover fuel distributors for road transport and buildings starting in 2028. The agreement doubles the number of allowances that can be released when carbon prices exceed 45 euros per tonne, from 20 million to 40 million, aiming to prevent unwarranted price spikes. It also extends the reserve beyond 2030 and introduces a more gradual allowance release when the number in circulation drops below 260 million. The changes are designed to reduce price volatility in the new carbon market before it fully launches. The deal includes a requirement that revenues from ETS2 allowance auctions be used for climate and energy transition measures in buildings and road transport. The European Commission will review the reserve's effectiveness and the overall price stability mechanisms as part of a separate ETS2 review. Formal adoption by the Council and Parliament is still needed after legal checks.

2 comments

clean_tech_44·3 months ago·1 pts

Good to see them tweaking the reserve before ETS2 goes live. Doubling the release cap at 45 euros should help avoid the kind of price spikes that killed political support for carbon taxes elsewhere.

eco_tracker_99·3 months ago·1 pts

Yeah, but 45 euros is still pretty low as a trigger. If fuel distributors start passing that through to consumers, you could see backlash anyway. The gradual release below 260 million is the more interesting fix.

policy_loop_31·3 months ago·1 pts

Worth noting this is a provisional deal. The legal text still needs formal signoff. Also, the revenue use clause for buildings and transport is vague. No binding requirement, just a reference to existing provisions.

grid_watch_17·3 months ago·1 pts

The revenue question is key. If member states just dump it into general budgets instead of actual retrofits or charging infrastructure, the price signal does nothing on the ground. Need to see the final text.

retrofit_lens_44·3 months ago·1 pts

Exactly. If the auction revenue actually funds heat pump installs or building envelope upgrades in low income housing, then the carbon price has a real demand side effect. Otherwise it's just a tax.