The European Union is preparing to introduce EU ETS2, an emissions trading system for the construction and road transport sectors. Fuel and heating prices are expected to rise, and this will primarily affect the poorest. Therefore, the authorities are convinced that this system will only work if early financial support is provided to vulnerable groups of the population.
The European Environment Agency (EEA) cites policy coherence, transparency, and public support as additional factors for success.
Reassuring the public
Before the introduction of EU ETS2, there was some tension in European society—people were concerned about the likely increase in fossil fuel prices and transportation costs.
The EEA acknowledges that the new emissions trading system will indeed have a direct impact on individuals and households, as well as on owners of internal combustion engine vehicles. The introduction of ETS2 is expected to lead to an increase in the cost of fossil fuels, whether for transport or for heating homes. This will have a disproportionate impact on less affluent households and regions.
To avoid social injustice in the EU, the Social Climate Fund is to be established. This instrument will use revenues from ETS2 to help the most vulnerable categories of Europeans cope with stricter climate policy. The Fund's resources are planned to be used to support households and small businesses. Additionally, revenues from ETS2 are intended to be invested in solutions that reduce dependence on fossil fuels.
For a balanced transition, the EU is also planning additional fiscal incentives, targeted assistance to citizens, and consulting services. In this way, the European Union wants to mitigate the social consequences.
Why construction and transport were chosen for EU ETS2
Transport remains one of the largest sources of greenhouse gas emissions in the EU. At the same time, it is extremely difficult to decarbonize. Transport's dependence on fossil fuels is enormous—93%—which makes it difficult to reduce pollution without new regulatory incentives.
The sectors of the economy covered by EU ETS1 reduced their emissions by 48% between 2005 and 2023. In contrast, this figure was only 4.4% for road transport.
Softer instruments did not work. The European Union had previously adopted an energy efficiency improvement strategy with mandatory emission reductions for new cars, promoted increased use of biofuels, and encouraged a switch to electric vehicles. However, demand for mobility and freight transport continued to rise, nullifying all achievements.
Emissions from the use of fossil fuels for heating decreased much more significantly – by 37%. This was facilitated by building insulation, the use of efficient boilers, and global warming, as winters became milder.
However, 75% of fossil fuels for heating are still used in the residential sector. To reduce this share, more active renovation and deployment of renewable energy sources are needed.
EcoPolitic previously reported that the EU Council has finally adopted an updated climate law, in particular, postponing the introduction of EU ETS2 to the beginning of 2028.
