EU ETS2 delay harms smaller firms, removes transition incentives – German industry
Clean Energy Wire
German business associations have criticised the decision by EU member states to postpone the full introduction of the Emissions Trading System for the transport and building sectors (ETS 2) by one year to 2028.
As Germany already has a national carbon price for fuels used in these sectors, the delay means an extra year of disadvantages for smaller industrial companies in the country, said industry association BDI. “The federal government is urgently called upon to mitigate this gap in European competition,” said deputy head Holger Lösch.
Asked about this delay in creating a level playing field for businesses across the EU, German environment minister Carsten Schneider rejected the criticism, arguing that the existing EU emissions trading system, the EU ETS 1 for the energy and industry sectors, remains the key instrument. He said governments were continuing to press the European Commission to extend free allocations of emissions allowances for energy-intensive industries.
The emissions trading system is one of the EU's key climate policy instruments. However, it currently only covers large industry players. The EU decided to expand it to cut CO2 output from transport and buildings. Companies that distribute fossil fuels used in transport or heating will have to buy emissions allowances, and pass on the costs to final consumers, from households to small industrial emitters.
As part of a deal on an emissions reduction target for the European Union for 2040, countries this week agreed to delay ETS 2 start to 2028 – a decision still subject to negotiations with the European Parliament. Several governments worried that a uniform CO2 price across the EU would lead to steep increases in petrol, fossil gas or heating oil costs, which would hit low-income households in poorer member states especially hard, as these often lack the resources to switch to climate-friendly alternatives. They warned this could fuel public resistance to climate action.
Energy industry association BDEW also criticised the delay. “This market-based instrument would have sent important price signals across Europe for the heat transition and the ramp-up of electromobility, and is a key measure for achieving the climate target that has just been adopted,” it said. The time until the system’s full implementation must now be used to introduce social measures to cushion the impact on low-income households, BDEW said.
Ingbert Liebing, managing director of local utility association VKU, said the "unreasonable" delay harmed companies' planning security and would make it more difficult to achieve climate targets. It would also require additional incentives in Germany to decarbonise heating and transport, Liebing said.
Environment minister Schneider said Germany's national carbon price would remain in place in 2027, with the government still to decide whether it would stay fixed or become tradable. The government would “ensure that there are no price jumps and that we continue the continuity from 2026,” he said.
