Extension of the emissions trading system to cover transport and buildings

Subject: Extension of the emissions trading system to cover transport and buildings

On 17 December 2022, during trilogue negotiations, the European Parliament, the Council and the Commission agreed to extend the emissions trading system (ETS) to cover almost all sectors1.

According to a study carried out by a number of institutions, including Cambridge Econometrics, the extension of the ETS to cover transport and buildings will result in enormous costs for private households. The figure is expected to total around EUR 1 112 billion in the period from 2025 to 2040. Energy bills may increase by an average of EUR 429 per year and per household as a result of the decision to extend the ETS to cover buildings.

Serious social repercussions are to be anticipated. The poorer the household, the harder it would be hit, since those on low incomes have little leeway for investments in new technologies, and it is virtually impossible for them to cut their heating and transport costs without sacrificing their quality of life. The study furthermore emphasises that extending the ETS to include buildings and transport will not lead to the desired emissions reductions2.

1. Has the Commission carried out a similar impact assessment in respect of energy bill increases for private households following the extension of the ETS?

2. How can the Commission justify this targeted and artificial rise in the price of housing and transport at a time of record inflation?

Submitted: 21.12.2022

1 German Federal Ministry for Economic Affairs and Climate Action, ‘Neue EU-Klimapolitik steht: politische

Verständigung zum Abschluss des "Fit for 55"- Klimapakets (New EU climate policy in place: political agreement on the conclusion of the “Fit for 55” climate package)’, press release, 18 December 2022. 2 Polish Economic Institute, European Roundtable on Climate Change and Sustainable Transition & Cambridge

Econometrics, Cost for households of the inclusion of transport and residential buildings in the EU ETS, Warsaw, June 2021, p. 4-5, p. 50-51.

Answer given by Executive Vice-President Timmermans on behalf of the European Commission (23 February 2023)

The Commission has carried out two impact assessments for the analysis of the economic, social and environmental impacts related to the new emissions trading system (ETS) which, as provisionally agreed by the Council and European Parliament, will cover emissions from the buildings, road transport and additional sectors: one concerning the Climate Target Pla n (3) and one for the revision of the EU ETS (4).

The new ETS aims to foster emission reductions in sectors which are difficult to decarbonise and to generate resources which can be redistributed, prioritising the most vulnerable households, by helping them invest in more energy efficient solutions for heating or road transport and thus lowering costs. The new ETS is due to start in 2027.

The ETS Impact Assessment found that the cost of overall fuel consumption could be reduced on average by up to 0.12 percentage points of household income if appropriate economically efficient investment takes place to reduce consumption and emissions.

The Council and European Parliament also provisionally agreed to establish a Social Climate Fund to support vulnerable households, micro-enterprises and transport users in the transition.

1 ∙ ⸱ German Federal Ministry for Economic Affairs and Climate Action, ‘Neue EU-Klimapolitik steht: politische Verständigung zum Abschluss des “Fit for 55”-

Klimapakets (New EU climate policy in place: political agreement on the conclusion of the “Fit for 55” climate package)’, press release, 18 December 2022. 2 ∙ ⸱ Polish Economic Institute, European Roundtable on Climate Change and Sustainable Transition & Cambridge Econometrics, Cost for households of the inclusion of

transport and residential buildings in the EU ETS, Warsaw, June 2021, p. 4-5, p. 50-51. 3 ∙ ⸱ SWD(2020)176.

4 ∙ ⸱ SWD(2021) 601.