Press Release

EU cracks down on pollution of buildings and cars, in major win for the climate before Christmas

December 18, 2022

Negotiators have agreed to extend the EU’s carbon market to buildings and road transport, with a social fund to help vulnerable households transition to clean mobility and homes.

The new Emission Trading Scheme (the so-called ETS2) will cover all emissions of buildings (heating) and road transport and run in parallel to the existing ETS which prices CO2 pollution from the power sector and industry. This essentially creates the world’s biggest carbon market. 

A landmark deal was also struck on the introduction of a new Social Climate Fund (SCF), which will channel carbon trading revenues to the most vulnerable households, helping them to transition while also alleviating the impact of the carbon price. The Fund will be of €86.7 billion euros. Governments could even start supporting low-income households one year before the carbon price kicks in in 2027. In a major win for the European Parliament and the climate, all revenues that don’t go to EU Funds must solely be spent on climate. 

Chiara Corradi, climate policy officer at T&E, says:With the Social Climate Fund the EU has addressed the social and climate crisis with a single instrument for the very first time. The ETS2 will be key to reaching our climate goals. It is good to have safeguards such as a maximum price in the new carbon market, however it is regrettable that Big Oil won’t contribute by paying part of the carbon price as the European Parliament demanded”.

Negotiators disagreed on a provision that would require Big Oil to pay part of the carbon price, instead of passing it on fully to consumers. With free allowances for big industry also continuing, the EU has failed to crack down on big polluters. 

On the other hand, an emergency clause was adopted. In case energy prices are too high, the entry into force of the ETS2 will be delayed by one year (to 2028). The European Parliament also secured  a cap on the price for households. To secure our climate ambitions the cap should have increased annually, but this provision will be revised in 2030.  

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