The European Commission will propose measures to mitigate the impact of its new carbon tax on citizens and businesses. Commission President Ursula von der Leyen wants to alleviate fears of price increases and provide Member States with resources to support families by adjusting the implementation of the CO2 tax.
The aim is to save the Green Deal, despite the relaxation of restrictions. “We need a transition that is fair and just, that protects and supports, in particular, vulnerable families, SMEs, and regions most exposed to structural change,” Von der Leyen said.
ETS2
Starting in 2027, Belgium, like all EU states, will apply the new Emissions Trading System (ETS2) to transport and heating fuels. The ETS2 requires that suppliers of natural gas, gasoline, and diesel purchase emission allowances for their CO2 emissions from 2027 onward.
The system is an addition to the existing ETS system for aviation and shipping, among others. Those costs are expected to be passed on to consumers, and several Member States had previously expressed concerns about the potential consequences of introducing the system.
The European Commission will not change the ETS2 law. Still, it will instead adjust its implementation to prevent price spikes and avoid social unrest by expanding the reserve of emission rights (releasing more if prices surge), bringing them onto the market earlier (to be purchased as early as 2026), and bringing forward revenues to member states, so they can start compensating households earlier.
Climate transition
The carbon market is one of the most essential tools for the EU to achieve climate neutrality by 2050. The EU still aims for a 90% reduction in emissions by 2040 vs. 1990 levels. However, several member states (including Belgium) want more flexibility due to public resistance and competitiveness concerns.
“We must encourage the climate transition, but also ensure that we don’t raise prices further for businesses and citizens,” European Commissioner for Climate Wopke Hoekstra said on Tuesday before the meeting of European environment ministers in Luxembourg.
