EU climate change plans on collision course over rising cost of emissions


Brussels’ historic attempt to tackle climate change faces a wall of opposition from governments in the bloc on the ground that its plans would hit their households with higher energy costs. 

EU legislators told the Financial Times that the European Commission’s attempts to expand carbon pricing to the biggest polluting sectors of the economy such as cars and buildings are at risk, as member states object that it will force its poorest to pay. 

Frans Timmermans, the commission’s executive vice-president in charge of the Green Deal, has said the measures were needed to “put a price on carbon, and a premium on decarbonisation”.

“Our current tools do not do enough. If we don’t fight the climate crisis, we will be fighting wars over water and food,” he said.

Brussels on Wednesday presented 13 legislative measures designed to help cut average greenhouse gas emissions by 55 per cent by 2030 and to reach net zero emissions by 2050, when compared with 1990 levels.

At the heart of the strategy is a bid to expand the EU’s carbon pricing mechanism, known as the Emissions Trading System, where companies have to pay for the cost of polluting.

Governments of some of the largest states lined up to question the merits of the expansion of the system to cover emissions from road transport and the heating of buildings, arguing it will have a “regressive” effect on those residents who cannot readily afford greener alternatives.

Since its creation in 2005, the system of allowances has been limited to the big power generators and polluting industries that buy the credits to cover the cost of their emissions.

The EU carbon price has hovered for the past month around €55 a tonne, or more than double its pre-pandemic level, as traders bet that the availability of carbon allowances will need to tighten if the EU is to meet its emission targets.

But France, Spain, Italy, Hungary, Latvia, Ireland and Bulgaria all raised concerns about the impact on citizens at a meeting of EU ambassadors on Wednesday when they were briefed following the release of the plans, diplomats told the FT.

Commission president Ursula von der Leyen also faced down a revolt among at least seven of her 26 commissioners before presenting the plans. The reforms will need the support of a qualified majority of EU governments and the European parliament to come into force. 

A senior EU diplomat said the ETS expansion could be abandoned, despite being positioned alongside a proposed €72bn fund to help alleviate energy poverty.

Tortuous negotiations are promised over the package, starting in coming months and expected to continue to 2023. The contentious policies include a ban on the sale of new diesel and petrol cars from 2035, the introduction of a kerosene tax for aviation, and a border levy on imports based on their carbon content.

The so-called social climate fund also met with resistance from “frugal” northern countries such as the Netherlands where there is opposition to the greater redistribution of funds in the bloc. “If the fund is scrapped, the logic behind the new ETS disappears”, said the diplomat.

The opposition has forced the commission to delay plans on how to use money generated from the carbon market and a border levy to pay back EU debt that was scheduled for next week, said officials.

Germany and Denmark are among the countries supporting the ETS expansion, which Brussels says is needed to accelerate the decarbonisation of transport and buildings where emissions have been steadily rising over the last 20 years. Germany has been trialing a national carbon market for cars and buildings since the start of the year. 

Denmark’s climate minister Dan Jorgensen said the ETS had already proven successful in reducing emissions from industry and should be expanded. “We know there are pitfalls, and we need to be careful that the system sparks reductions rather than the opposite”, he told the FT. 

Pascal Canfin, a French MEP and head of the parliament’s environment committee, said the measure risked hampering the message behind Europe’s climate push in the eyes of citizens. “I am supportive of the package but on [the ETS] the narrative has become about imposing new taxes. It is a real pity.”

France is due to play a central role in leading negotiations on the bumper green package as Paris will take up the EU’s rotating presidency next year, coinciding with presidential elections.

Emmanuel Macron’s government, which has supported the EU’s climate goals, has warned against making consumers face the kind of energy price rises that triggered the gilets jaunes protests against the government.

Canfin said the election run up would mean the French council presidency “cannot give the green light to a measure that is profoundly against what we want to see”. 

A French official said on issues like heating “people have no immediate alternative — they can’t change their boilers overnight. What seems really important to us, because of the experience of the gilets jaunes, is to have a way of helping people through the change.”

Additional reporting from Sam Fleming in Brussels and Victor Mallet in Paris

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