The new Emissions Trading System for road transport and buildings (ETS II) represents the next step in advancing a technology-neutral combination of policies aimed at decarbonizing the economy.
Although the current framework already includes strong safeguards to ensure the smooth launch of the system and to manage the development of carbon prices, the European Commission has assessed additional options to strengthen the stability and predictability of the ETS II regulatory framework before its implementation.
A joint analysis by BNEF, Bloomberg Philanthropies and the European Climate Foundation indicates that ETS II is expected to become one of the most expensive carbon markets in the world, increasing uncertainty for European citizens. According to the revised BNEF baseline forecast, updated with the latest data on emissions and costs, carbon prices under the EU ETS 2 could reach a peak of €122 per metric ton (USD 143/t) by 2030 and averaging €99/t between 2027 and 2030. This reflects both the limited availability of emission allowances and the slow uptake of heat pumps and electric vehicles, constrained by high costs.
To ensure effective decarbonization in these sectors, measures must be taken to prevent sharp and disruptive spikes in carbon prices that could lead to energy poverty among households or slow down the green transition.
The European Commission is expected to present a package of proposals soon to address concerns regarding future price levels and volatility in the carbon market, and to help accelerate investments ahead of the ETS II launch. This move comes in response to letters received from 19 Member States and several Members of the European Parliament.
First, amendments to the Auctioning Regulation will allow auctions under ETS II to begin earlier, providing a more predictable price signal and enabling Member States to access carbon revenues sooner. This approach mirrors the start of the mandatory second phase of ETS I, when advanced auctions were held two months before regular trading began.
Secondly, together with the Commission, the European Investment Bank is currently exploring a new ETS II Frontloading Facility for Member States. The Facility will prefinance decarbonisation measures to accelerate the uptake of clean heating and mobility technologies, improve their affordability for low- and middle-income households, and support the implementation of the Social Climate Fund.
In addition to the above measures, targeted amendments to the Market Stability Reserve Decision (MSR) will enhance the mechanism’s ability to respond if ETS II prices exceed a certain threshold, increase its long-term capacity, and allow for earlier and smoother interventions to stabilize allowance supply under ETS II
The proposed measures can be implemented without amending the ETS Directive. The Commission’s services are now preparing the relevant legal proposals with a view to their swift adoption in the coming weeks.
IETA’s ETS II National Transposition Tracker provides real-time updates on implementation progress, national laws, and country insights to enhance transparency.
