The European Commission sent to Member States, on Wednesday 16 March, a non-paper to highlight the potential consequences of not establishing an EU-wide emissions trading system for road transport and buildings (ETS2), both in terms of CO2 emissions and social and economic costs.
In such a scenario, at least 55 million tonnes of CO2 would have to be reduced by other means, without the guarantee that an ETS offers in terms of emission reductions, says the note, sent on the eve of a debate on the subject between Member States’ Environment Ministers (see other news).
This corresponds, according to the Commission, to about 10% of the additional reduction effort required to reduce the EU’s net greenhouse gas (GHG) emissions by at least 55% by 2030 (the target enshrined in the ‘Climate Law’).
Achieving the 2030 target would then require doubling the share of effort provided by national policies and/or regulatory tools in the buildings and road transport sectors, the institution believes, given that “carbon pricing and regulation each account for around 50% of the additional effort required in these sectors”.
An increase in costs
The absence of an ETS2 means that additional efforts will have to be made by Member States and by all households, “without additional revenues at EU level to support these investments”, the Commission warns.
With regard to investments in buildings, the institution estimates that the additional annual investment costs for the 40% of households with the lowest incomes will be €5 billion (€30 billion per year instead of €25 billion with the ETS2).
According to its analysis, low-income households in all Member States “can, on average, be better off” with the ETS2 and the ‘Social Climate Fund’ (which would be fed by part of the additional revenues from this new carbon market).
The Commission points out that the buildings and vehicles of the richest 20% of households are responsible for 32% of the emissions that would be covered by the ETS2, while the poorest 20% of households are responsible for only 9% of these emissions.
It also recalls that the additional burden on vulnerable households caused by the ETS2 would be compensated by the ‘Social Climate Fund’.
According to its proposal, the size of this fund would be sufficient “to co-finance about 40% of the estimated annual investment costs for all the necessary investments of households in the two poorest income quintiles in each Member State”.
Looking at households as a whole, a regulatory-only approach would require an increase in their annual investment costs in 2030 of 0.85% (€69 billion) compared to current policies, versus 0.71% (€57 billion) in the case of a mix of regulatory measures and carbon pricing, the Commission note also says.
See the note: https://aeur.eu/f/tc (Original version in French by Damien Genicot)