Staff Reporter

The European Union’s upcoming emissions trading system, slated to launch in 2027, is projected to increase costs for home heating and transportation, according to a recent report from BloombergNEF.

This new system, known as ETS2, will focus on carbon dioxide (CO2) emissions from fuel combustion in buildings, road transport, and small industries that are not part of the existing EU Emissions Trading System (EU ETS).

The European Commission notes that current emission reductions in these areas have not been adequate to ensure the EU meets its climate neutrality target by 2050. The carbon price established by ETS2 aims to incentivize investments in building renovations and low-emission transportation options.

The upcoming ETS2 will operate as a ‘cap and trade’ system similar to the existing EU ETS, but it will focus on emissions upstream.

This means that fuel suppliers, rather than end users like households and drivers, will be responsible for monitoring and reporting their emissions.

While consumers may not see direct charges, fuel suppliers are expected to pass along the increased costs associated with carbon emissions trading.

According to BloombergNEF’s analysis, the price of CO2 could soar to as much as $161 (149 euros) per metric ton by 2029, just two years after the system’s launch. This marks more than a doubling of the current CO2 price under the EU ETS for industry and power plants.

The analysis also indicates that costs for road transportation could rise by 27%, while home heating bills could jump by as much as 41%.

“Ambitious targets and high costs risk making households and small businesses the losers,” the report warns.