Key facts
- The EU has agreed to strengthen a financial tool to stabilize new carbon costs for heating and fuel, set to begin in 2028.
- This measure aims to protect households from energy price spikes by issuing emergency permits if carbon prices exceed a certain threshold.
- The expanded carbon market, Emissions Trading System 2 (ETS2), will require fuel suppliers to buy 'polluting permits'.
- If carbon prices exceed €45 per tonne, the EU will inject up to 80 million emergency permits into the market annually.
- A 2026 study suggests the ETS2 will increase the cost of living by over 1% in all EU countries.
The European Union is implementing measures to shield households from potential energy price spikes resulting from the expansion of its carbon market to include road transport and buildings, a move set to take effect in 2028. The European Council and European Parliament have reached an agreement to bolster a financial mechanism designed to stabilize these new carbon costs.
This agreement establishes an 'economic safety net' by allowing for the issuance of emergency permits should carbon prices surpass a predetermined level. The initiative, part of the expanded Emissions Trading System 2 (ETS2), requires fuel suppliers to acquire permits for the carbon dioxide emitted by their products. Fluctuations in fuel demand could lead to increased permit prices, potentially making fuels like gasoline and heating oil more expensive for consumers already grappling with high energy costs.
Danuše Nerudová, a Member of the European Parliament, stated that the deal enhances price stability and prioritizes support for vulnerable citizens. The European Commission is tasked with evaluating the financial tool before its 2028 implementation and will assess the ETS2's application to buildings and road transport by October 2027, considering measures for vulnerable households.
Despite the agreement, the full implementation of ETS2 has faced controversy, with some member states like Slovakia and the Czech Republic advocating for a delay until 2030 due to social impact concerns. Conversely, countries including Sweden, Denmark, Finland, the Netherlands, and Luxembourg have opposed any delays or amendments.
A 2026 ScienceDirect study indicated that the ETS2 is expected to increase consumer prices across all EU countries, with central and eastern European nations potentially facing larger impacts compared to northern and western countries with better energy efficiency and more widespread electrification.
Under the new agreement, the EU will release up to 80 million emergency permits annually if carbon prices exceed €45 per tonne, a significant increase from the original limit. This mechanism aims to increase supply, thereby reducing carbon prices and energy bills. The market stability reserve, initially created in 2015 to manage surplus permits in the industrial sector, is being replicated for ETS2 to ensure price stability.