Countries will again be set targets for reducing the impact of the sectors outside the EU emissions trading system: road transport, buildings, agriculture, waste, and small industries which are exempt. Last year the Commission had signalled this system would be replaced with a carbon market as the main way to bring down emissions. But after pressure from the public, civil society and member states, last week Von der Leyen said incentives for national climate action would remain in place and that carbon pricing would play a smaller role in a system separate to the ETS but complementary to national targets.
Any EU carbon pricing system for cars, trucks and home heating would include significant compensation for low and middle-income families, von der Leyen said. She was speaking after a special meeting of EU national leaders, who stressed the need to ensure fairness and the redistribution of revenue generated by the higher fuel bills that EU citizens would face.
The decision to achieve emissions reductions through a mix of EU regulations, national measures and carbon pricing came in the wake of research showing that using carbon pricing alone would add 50 cents, on average, to the price of a litre of diesel by 2030. It would also double home heating bills. The EU carbon price would reach an estimated €180 a tonne by 2030 under such a plan, the study by Cambridge Econometrics found.
T&E welcomed von der Leyen’s announcement that national targets, under the Effort Sharing Regulation, would be the centrepiece of achieving the bloc’s 2030 climate goals. It said the study found that increasing the targets for member states – which would oblige governments to phase out fossil-fuel company cars, invest in clean modes like rail, and take other measures – is a much more effective and equitable way of bringing down transport emissions. The EU could increase disposable incomes across society and grow the economy by 2% (GDP) if it relies more on national climate targets to meet its 2030 goals, the study found.
T&E said a capped carbon price could help reduce emissions from road transport in the long term. In the short term, yearly legally binding and ambitious national targets under the Effort Sharing law would ensure the 2030 target is met. Governments would also be able to use the revenues raised through such a limited carbon price to invest in low-carbon technology – like retrofitting buildings. It could also ‘recycle’ a significant part of those revenues back to citizens in a visible way through discounts on electricity bills or ‘climate dividend’ payments.
Sofie Defour, climate manager at T&E, said: “There is a role for carbon pricing but that’s mainly in support of more effective policies like car emissions standards, and certainly not at the price levels that the research shows. The EU’s Green Deal can be an example to the world of how to do a swift and just transition, but only if it uses the right tools.”
“The heavy lifting needs to come from policies that make alternatives accessible like rapid electrification, building up a world-class charging network and emissions-free cars. Carbon pricing can support these policies, but only if we bring people on board by starting slow and giving back the money.”
The Commission will publish its proposal on the Effort Sharing Regulation and the new, small-scale ETS for road transport and buildings on 14 July.