European ETS2, 16 EU countries call for stricter CO2 price caps to prevent rising costs for consumers in transport and residential heating.
The document already has broad support and could reach the qualified majority needed to pass the proposed changes.
Ahead of the launch of the new European ETS2, Germany, the Czech Republic, and 14 other EU member states are urging the European Commission to introduce stronger mechanisms to control carbon prices. The concern shared by several governments is that the upcoming carbon pricing system may drive up costs too sharply for consumers.
According to a draft seen by Reuters, the proposal has gained enough traction to potentially secure the qualified majority needed for approval. The goal is to pressure the European Commission into revising the rules of ETS2 for private transport and residential heating.
What is the European ETS2?
The European Emissions Trading System 2 (ETS2) is a carbon market established by the European Union in 2024. Starting in 2027, it will extend the current ETS1 scheme to include emissions from buildings, road transport, and small businesses. Under this system, fossil fuel suppliers must purchase allowances proportional to the emissions generated by their products.
Proposal to amend the European ETS2 mechanism
The upcoming expansion of the EU carbon market will put a price on CO2 from polluting fuels. The current mechanism already includes a safeguard: if CO2 prices reach €45 per ton, additional carbon allowances are released into the market to limit price spikes and shield consumers from sudden cost increases.
The new proposal calls for reinforcing this safeguard by expanding the volume of carbon permits injected into the market when prices rise uncontrollably. The group of 16 countries also suggests creating a dedicated reserve of CO2 allowances that could be released in times of supply shortages.
Additional changes include moving up the timeline for the first auctions of ETS2 allowances, providing earlier signals on expected carbon prices.
A united front of 16 EU countries
The initiative has been endorsed by Austria, Belgium, Bulgaria, Croatia, Estonia, Italy, Latvia, Lithuania, the Netherlands, Poland, Romania, Slovakia, Slovenia, and Spain. Both Poland and the Czech Republic have emphasized that if not properly regulated, the European ETS2 could undermine the EU’s ambitious climate goals by pushing up fuel prices and sparking public backlash.
The EU has already agreed to channel billions of euros from ETS2 revenues into the Social Climate Fund (SCF), which will support vulnerable households, subsidize electric vehicle purchases, and promote energy-efficient building renovations.
