A new EU price surcharge on fossil fuels will not be limited to a previously-expected rate of €45 per tonne of CO2. Experts predict a more realistic figure of up to €300 and a direct knock-on effect to consumers.
The EU’s Emissions Trading System (ETS) is a policy instrument designed to reduce greenhouse gas emissions through legal limits on emissions per sector and the creation of a carbon trading system for excess capacity. Companies will be allocated a certain amount of emission allowances, which can be bought and sold on a market, allowing companies that are able to reduce their emissions to sell their unused allowances to those that need them.
Under the scheme, a new surcharge will be placed on all fossil fuels including heating oil and gas with plans for implementation as of 2027. The charge applies to home heating and electricity generation, in the hope of encouraging a shift towards renewable energy.
The EU had promised to cap the surcharge at €45 per tonne which would increase the price of petrol by approximately 12 cents per litre.
Christian Flachsland, Director of the Centre for Sustainability at Hertie School Berlin, says that there is little evidence that the envisaged €45 per tonne ceiling would hold and that the rate will “more likely” be between €100 to €300.
Critics of the ETC regard it as an added tax during an energy crisis and an unfair intrusion into the market mechanism. They also claim it would disproportionately burden poorer consumers.
A spokesperson for the EPP party, who are the main backers of the proposals, confirmed that the €45 cap was likely an underestimate.
The European Parliament will vote on the ETS on Wednesday, April 18, with the €45 limit playing a key role on how the various political factions will vote. Many MEPs in the Renew group will drop their opposition to the legislation due to the guarantee of the price cap. Green Party members have attempted to quell inflation fears as a result of the new regulations, while strong opposition to the ETS comes from right-wing factions in the Parliament.
European politics have been rocked by disputes over the green transition with member states split on plans to ban new carbon-emitting cars by 2035 and protectionist tariffs as the EU feels the pinch from offshoring to the United States.
