The European Union’s planned implementation of a carbon price for buildings and transportation, set to begin in 2027 through the Expansion of the Emissions Trading System (ETS 2), is facing growing skepticism among experts. Concerns are mounting that the mechanism, intended to incentivize a shift away from fossil fuels, risks being undermined by politically motivated compromises and ultimately failing to deliver meaningful climate action.
A central point of contention revolves around the EU Commission’s announced tempering of the regulatory framework, most notably the introduction of a price ceiling. Triggered when the carbon price reaches a threshold anticipated to fluctuate between €60 and €65 per tonne (adjusted for inflation), the mechanism would release additional emission allowances onto the market. Michael Pahle of the Potsdam Institute for Climate Impact Research characterizes this as establishing “practically a politically acceptable maximum price” effectively neutering the intended effect of a robust carbon price. The prospect has already precipitated a significant downturn in future markets, with current contracts tumbling from above €80 to approximately €63 per tonne following the announcement.
Critics argue that a capped and artificially low carbon price sends the wrong signal to consumers and businesses. Stefan Bolln, Chairman of the energy consultancy association GIH, warns that artificially subdued pricing leaves fossil heating systems “economically attractive” effectively penalizing early adopters and hindering the expansion of renewable energy sources. This, in turn, diminishes the incentive for crucial energy-efficient building renovations.
Germany’s existing national carbon price of €55 per tonne currently adds approximately 16 cents to the price of a liter of gasoline – a stark contrast to 2020 when such a levy was non-existent. A €63 per tonne carbon price, as currently projected, would only increase this by a further two cents. This marginal increase pales in comparison to the daily variations in fuel costs depending on time and location.
The prospect of political interference further compounds the concerns. Jakob Graichen of the Freiburg-based Öko-Institut critiques the ongoing political debate, arguing that the explicit acknowledgement of state intervention at higher price levels fosters a “wait-and-see” approach. Businesses, he suggests, will be reluctant to invest in costly emission reductions knowing help is likely to be available.
Agora Energiewende, a clean energy think tank, anticipates that the transition to ETS 2 will not result in a significant price increase. Project lead Murielle Gagnebin even suggests a possible slight price decrease, implying the potential need for the German federal government to introduce a national minimum carbon price to preserve the desired market correction. The fundamental questions remain: can sufficiently stringent measures be implemented to avoid political pressure undermining the intended climate impact or will ETS 2 become another example of well-intended policy diluted by short-term political expediency?