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Road transport under the EU ETS

The European Commission's upcoming energy and climate legislation package in June 2021 will "propose the extension of the Emissions Trading Scheme (ETS) to sectors such as buildings and road transport", said EU Energy Commissioner Kadri Simson on 25 March 2021. So far, the inclusion of road transport in the ETS has only been speculation and has not been officially confirmed by the European Commission. EU climate policy emissions are generally regulated by the EU Emissions Trading System (EU ETS), which is a European cap-and-trade mechanism for the power and industry sectors covering 40 percent of emissions. All other emissions are the sole responsibility of EU Member States.

In accordance with the effort sharing law, Member States have to meet national targets for transport, buildings and agriculture. The EU ETS has proven to be an effective tool in reducing GHG emissions. It is clear that when the carbon price is sufficiently robust, it becomes a strong driver for immediate change, and a clear signal for low carbon investments. It thus contributes decisively to the deployment of renewable energy and energy efficiency technologies. Therefore, the Commission is thinking about the development of an expanded EU ETS that would also include road transport. The Commission argues that in road transport, emissions trading has the advantage of capturing fleet emissions under the cap and simultaneously incentivizing behavioral change with lasting effects on mobility solutions through the price signal. The idea to include road transport in the EU ETS was already criticized last year when first peculations appeared. Even Frans Timmermans, Executive Vice President of the European Commission for the European Green Deal and European Commissioner for Climate Action, said that he is not convinced that this is the right way forward at this point in time. He stated that the EU would further tighten the CO2 emissions targets it imposes on carmakers in the coming years, and that this was a more efficient method of forcing deep pollution cuts. Also environment NGOs like Transport & Environment argued that including transport in the EU ETS by simultaneously proposing higher CO2 standards can be highly problematic as it would remove national accountability for transport emissions according to the effort sharing law. Some governments (i.e. northern and western European states) certainly like this idea, as it would prevent holding them accountable. However, the national climate goals are key drivers for major reforms and regulations such as fuel tax increases, car tax reforms or lower speed limits. Moreover, not complying to the effort sharing law exposes Member States to court cases filed by the Commission or own citizens. Finally, national accountability has been key in getting Member States backing for ambitious EU measures such as CO2 standards for cars and trucks. One instrument, for example, could be to include transport fuels in the EU ETS. As a result, oil companies would have to buy carbon allowances raising fuel and heating prices, which could lead to an enormous political backlash for the European Green Deal. In addition, the ETS is a political instrument influencing the price in the exposed sectors as well as popular acceptance. The Gilets Jaunes (Yellow vests movement) should be a warning in that regard.


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