European citizens and businesses will have to pay more often for CO2 emissions

Negotiators from European member states and the European Parliament reached an agreement on a reform of the Emissions Trading System (ETS) on Sunday morning. This was reported by the Czech presidency. In the future, European citizens and businesses will have to pay more often for the CO2 they emit. A new social energy fund will absorb the consequences of the energy transition for consumers.

The current emissions trading system will be strengthened. In recent years, energy companies and industry have had to obtain permits to emit greenhouse gases. Fewer allowances are available each year and they get more expensive. The emissions trading system means that companies have to emit less or pay more.

Now the number of allowances has to be reduced faster than before, which means that emissions must also decrease faster. Furthermore, free allowances must be abolished by 2034. Companies that do not commit to the energy transition will have to surrender free permits.

Social Climate Fund

From 2027, the emissions trading scheme will be extended to heating of buildings and transport, both for consumers and businesses. Through gas stations and energy companies, consumers and businesses will pay for the CO2 they emit through their exhausts and chimneys.

From 2026, a social climate fund will be introduced to absorb additional consumer spending as a result of the energy transition, such as rising heating costs. The fund will amount to 86.7 billion euros. It is financed partly by revenues from emissions trading and partly by the Member States.

The measures form the centerpiece of the ‘Fit for 55’ package, which should help European member states cut CO2 emissions by 55% by 2030 compared to 1990 levels and become climate-neutral by 2050. The deal it still needs to be confirmed by the European Parliament and the Member States, but it is considered a formality.