Mar 7, 2025
The new European Union carbon market is expected to impact households and small businesses.
According to a new report by research firm BloombergNEF, the European Union's upcoming emissions trading system, anticipated to begin in 2027, is likely to increase costs for home heating and transportation.
The new EU Emissions Trading System for buildings, road transport, and small industries, referred to as ETS2, is expected to be fully operational by 2027.
ETS2 aims to tackle carbon dioxide (CO2) emissions from fuel burning in buildings and road transport, alongside covering additional sectors, primarily small industries that fall outside the current Emissions Trading System - EU ETS.
"Emission reductions in these areas have not been enough to set the EU on a solid course towards its target of climate neutrality by 2050. The carbon price established by the ETS2 will act as a market incentive to encourage investments in building upgrades and low-emission transportation," states the European Commission.
Even though it will operate on a 'cap and trade' model similar to the existing EU ETS, the ETS2 will focus on upstream emissions. This means that fuel suppliers, rather than end-users like households or motorists, will be responsible for monitoring and reporting their emissions.
While consumers may not pay these costs directly, fuel suppliers are likely to pass increased expenses related to carbon emissions trading onto them.
BloombergNEF predicts that two years after the launch in 2027, the price of CO2 could soar to as high as $161 (149 euros) per metric ton by 2029. This price would be more than double the current CO2 price under the existing EU ETS for emissions from industry and power generation.
The carbon price within EU ETS2 could lead to a 27% increase in road transportation costs and a possible 41% rise in home heating bills, according to BNEF's analysis.
The report concludes that "ambitious targets and elevated costs could result in households and small businesses facing significant disadvantages."
The new EU Emissions Trading System for buildings, road transport, and small industries, referred to as ETS2, is expected to be fully operational by 2027.
ETS2 aims to tackle carbon dioxide (CO2) emissions from fuel burning in buildings and road transport, alongside covering additional sectors, primarily small industries that fall outside the current Emissions Trading System - EU ETS.
"Emission reductions in these areas have not been enough to set the EU on a solid course towards its target of climate neutrality by 2050. The carbon price established by the ETS2 will act as a market incentive to encourage investments in building upgrades and low-emission transportation," states the European Commission.
Even though it will operate on a 'cap and trade' model similar to the existing EU ETS, the ETS2 will focus on upstream emissions. This means that fuel suppliers, rather than end-users like households or motorists, will be responsible for monitoring and reporting their emissions.
While consumers may not pay these costs directly, fuel suppliers are likely to pass increased expenses related to carbon emissions trading onto them.
BloombergNEF predicts that two years after the launch in 2027, the price of CO2 could soar to as high as $161 (149 euros) per metric ton by 2029. This price would be more than double the current CO2 price under the existing EU ETS for emissions from industry and power generation.
The carbon price within EU ETS2 could lead to a 27% increase in road transportation costs and a possible 41% rise in home heating bills, according to BNEF's analysis.
The report concludes that "ambitious targets and elevated costs could result in households and small businesses facing significant disadvantages."