ETS 2 under control: EU approves mechanism to keep allowance prices in check

Luxembourg, 9 October (CTK correspondent) - EU member states today gave final approval to changes to the ETS 2 emissions trading system aimed at controlling the prices of planned allowances for road transport and buildings. The new rules introduce a price ceiling of 45 euros (1100 crowns) per tonne of CO2, after which allowances from the market stability reserve (MSR) will automatically start to be released into circulation. This is intended to limit price increases. The decision will now be published in the Official Journal of the EU and will enter into force on the twentieth day after publication.

The emissions allowance system is designed to encourage producers to reduce carbon dioxide emissions. However, many politicians are concerned about the possible impact of high allowance prices on residents, which could be felt under ETS 2 through payments for heating buildings.

The market stability reserve balances supply and demand in the ETS 2 system by automatically adjusting the number of emissions allowances available in circulation. The change approved today "strengthens the market stability reserve and further helps ensure a stable and predictable allowance market ahead of the full launch of ETS 2 in 2028," says a statement by the Council of the EU, which represents the member states.

EU finance ministers backed the final decision at a meeting in Luxembourg today. The European Parliament had already approved the changes to emissions allowances in mid-September. Czech Prime Minister Andrej Babiš, a prominent critic of the system, said at the time that the change was better than nothing, but would not really help with anything.

The EU ETS emissions trading system is designed to encourage emissions reductions. Companies must buy allowances for every tonne of carbon dioxide they emit. The more they emit, the higher their costs, giving them an incentive to invest in cleaner technologies.

The EU ETS 1 system is Europe's main emissions allowance market, covering energy, heavy industry and aviation within the Union. The expansion of the system, EU ETS 2, is due to be introduced after a one-year delay, in 2028, and will cover road transport and building heating. ETS 2 will also include a Social Climate Fund intended to mitigate the impact on low-income households.