Briefing

Making ETS2 work

December 8, 2025

Measures to keep ETS2 prices affordable

€50bn In lost revenues in 2027 if ETS2 is delayed

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Weakening the car CO2 standards will only make the EST2 more expensive. Here’s why:

The Council and the European Parliament agreed to delay ETS2 by one year. Before the prospect of an ETS2 delay emerged, 2027 carbon price projections under the MSR reform ranged from below €40/tCO₂ to €63/tCO₂ - broadly in line with the current French carbon tax on road fuels (€44.6/tCO₂) and the German price for 2026 (€55-€65/tCO₂).

As the EU ETS2 puts a price on carbon to incentivise greener alternatives, including in the transport sector, the higher the demand the more prices go up. Weakening the EU car and truck CO2 standards would therefore mean more combustion engine cars on the road for longer and with it a higher ETS2 carbon price.

Furthermore, weakening car CO₂ standards would also remove pressure on industry to roll out affordable, mass-market electric vehicles (EVs). This disproportionately hits poorer households.

The delay to EST2 also represents a double blow to poorer households as it would deprive governments of €50 billion of revenues in 2027 which could be reinvested into measures like social leasing, charging infrastructure and improved public transport, or given back to citizens in the form of cash redistribution. All this could have helped to transition lower-income households away from fossil fuels and shield them from price rises.

Reducing demand for ETS allowances by increasingly adopting zero emission technologies and efficiency measures is the only way of guaranteeing the long-term success of ETS2, as it pushes prices down while at the same time maintaining climate integrity.

The EU should:

  • 1

    Reform the MSR: Adjusting the MSR will lower carbon price in the short term, while low-carbon solutions for road transport and heating become more accessible to low-income households.

  • 2

    Reject any further delay to ETS2: Businesses, households and member states need certainty and trust to plan and invest in a fair transition.

  • 3

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