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In the aftermath of the green wave election, the key question MEPs are asking VdL is what her climate policy will be. This in itself is remarkable. For the first time a presidential candidate is expected to present a credible climate plan to secure parliamentary support. Earlier this week VdL made her first proposals. She announced climate as her top priority and plans to raise the ambition of the 2030 EU climate target from -40% to -50%. She wants to introduce a carbon border tax and told MEPs she wants to retain aviation and add shipping to the EU emissions trading system (ETS). This all goes roughly in the right direction (although it’s not enough, as leading EU green NGOs said in their response).
But then she said something strange and hard to understand: “I think we have to think about how to include traffic, mobility and how to include buildings. I’m aware of the fact that these will be first of all parallel systems with the existing ETS that have to converge 2030.”
It’s not entirely clear what VdL meant here. When she talks about a “parallel system” perhaps she imagines creating a separate, new ETS for transport and buildings? Or perhaps she means a European carbon tax for transport and heating fuels? But then she also wants to see convergence (or integration?) by 2030, which in policy terms is tomorrow. That, unfortunately, sounds a lot like reviving an old car industry dream – the inclusion of transport in the ETS.
Putting road transport in the ETS was extensively discussed in 2014; it was discussed again when the Juncker Commission prepared its low-emission mobility strategy and, despite intense car industry lobbying, it was roundly rejected. As a new policy cycle begins, it is useful to reiterate why for road transport the ETS is not a solution, and why road transport isn’t a solution for the ETS.
First, let’s be clear, when we talk about road transport in the ETS, we’re talking about including transport fuels, ie diesel and petrol. At the ETS’ current price of €25/ton this would increase fuel prices by around 6 cents. So it acts as a tiny top up on the fuel tax. It’s not just a very complex way to achieve a 6 cent tax increase (Germany and others can decide to do this tomorrow), but it’s an approach with strong limitations.
We calculated in 2014 that at its maximum price of €100, the ETS could reduce road transport emissions by around 10%. To achieve the required 100% emission cut you’d need inconceivably high ETS prices. And all of this is assuming that the ETS inclusion would not lead to national governments lowering fuel taxes or scrapping national carbon taxes.
So the ETS is fundamentally not the right instrument to successfully reduce car and truck emissions. That’s exactly why carmakers love the ETS and prefer it over much more effective EU CO2 standards.
Second, the inclusion of transport (and buildings) in the ETS could destroy the Climate Action Regulation. This law is a pillar of EU climate policy and sets binding climate targets for the transport, buildings and agriculture sectors. Achieving the -30% non-ETS goal is challenging. It requires improved building efficiency, a shift away from oil and gas to heat homes and, most importantly, a transformation of mobility. But if you put transport and buildings in the ETS, all of a sudden, that’s no longer necessary. Instead transport becomes part of the European carbon market which lives a life of its own.
Finally, the inclusion of transport in the ETS would not strengthen the carbon market (as is extensively explained here). Au contraire. The ETS has exposed (see: steel) and sheltered sectors (power, aviation). If you include transport you shift carbon reduction efforts away from the – sheltered – road transport sector to potentially exposed ones causing an outcry in the affected sectors.
Perhaps we’re overly worried. It could just have been a slip of the tongue or a loose idea that she’d hope the Greens would be excited about. After all, Ursula von der Leyen and her transition team have only just started.
To sum up, it’s positive that VdL wants to do more on transport. But the ETS idea is as flawed today as it was five years ago. Rather, Von der Leyen should focus her efforts on new approaches that can help EU carmakers succeed in the shift to electric mobility, by rolling out recharging infrastructure across Europe, by developing the EU’s battery strategy and, most importantly, by strengthening the EU car CO2 standards which are the most important driver for progress in the transport sector and the one reason we finally see electric cars coming to Europe.