Czech-backed coalition of EU member states seeks tighter price controls under ETS2

The current proposal for the new emissions trading system includes measures aimed at regulating allowance prices. However, a coalition of 16 countries, including the Czech Republic, says the safeguard mechanism should be stricter.

As reported by Rinnovabili, the current draft legislation establishing the ETS2 system includes a safety valve that kicks in when the price of a CO₂ allowance reaches €45/t. As in the ETS1 system, the measure allows additional allowances to be released into circulation, with the aim of cooling the emissions market. The coalition of 16 countries, however, says the volume of these additional allowances is too small and is calling for it to be increased.

From 2027, the European ETS2 will extend the existing emissions trading system to road transport, buildings and smaller businesses. Suppliers of fossil fuels will be required to buy allowances in proportion to the carbon content of their products, effectively passing a new environmental charge on to end consumers.

In a public letter sent to the European Commission, several countries, including Czechia, Austria, Belgium, Italy, the Netherlands and Poland, propose establishing a special stability reserve that would be activated in the event of a sudden price shock. They also want to bring forward the first allowance auctions so the market receives an early price signal and can prepare better.

The initiative reportedly has enough support to secure a qualified majority in the Council of the EU, giving it a real chance of changing the legislation before ETS2 begins operating.

The signatories believe a firmer price cap would primarily protect households from excessive increases in their costs. Member states point to recent protests in several European countries. In France, for example, the public reacted to rising fuel prices.

Critics, on the other hand, fear that this would weaken the entire ETS2 system and its signal for the price of carbon, potentially slowing progress in moving away from fossil fuels. Critics of the new proposal also point to the importance of ETS2 revenues, which are intended to flow into the Social Climate Fund to support vulnerable households and help fund the purchase of electric vehicles and the insulation of buildings.

The EU aims to balance the social impacts of more ambitious climate policy and maintain public support for achieving emissions neutrality by 2050.