European Parliament approves cap on rise in emissions allowance prices for road transport and buildings

MEPs today approved 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 cap of 45 euros (CZK 1,100) per tonne of CO2, at which point allowances from the market stability reserve (MSR) will automatically begin to be released onto the market. This is intended to limit price increases. The amendment will enter into force once it is also approved by member states, which reached a preliminary agreement with the European Parliament on its form in June.

The emissions allowance system is intended to incentivise producers to reduce carbon dioxide emissions. However, many politicians are concerned about the possible impact of high allowance prices on households, which could be reflected in the ETS 2 system through payments for heating buildings.

"It is about protecting our citizens, who are already facing high energy prices," Czech MEP Danuše Nerudová (STAN), from the largest European People's Party (EPP) group and the rapporteur for the proposal, said shortly before the vote.

Parliament approved the amendment with 467 votes in favour, 158 against and 41 abstentions.

European Commissioner Magnus Brunner said today that the EU executive would assess the effectiveness of "measures to protect potentially vulnerable households" by October 2027. Under the revised rules, the system should then begin operating in 2028.

ETS 2 is also to include a Social Climate Fund designed to mitigate the impact on low-income households.

The EU's main emissions allowance market is ETS 1, which covers energy, industry and aviation.