A new European Union carbon market targeting transportation and gas-fired heating is projected to significantly increase household costs by the end of the decade, according to a report by BloombergNEF (BNEF).
The research indicates that the price of carbon dioxide under the new emissions trading system (ETS2), slated to launch in two years, could reach €149 per metric ton by 2029. This is more than double the current EU price for emissions from power plants and industry.
BNEF anticipates that the price surge will incentivize emission reductions as consumers transition to cleaner alternatives such as heat pumps and electric vehicles. However, this transition comes with a cost that has prompted some EU politicians to advocate for delaying the implementation of the new market. While consumers won’t directly pay the carbon price, it’s expected that fuel suppliers will pass these costs onto them.
For those who choose not to adopt lower-carbon technologies, the new carbon price could potentially raise road transportation expenses by as much as 27%, while home heating bills could increase by up to 41%, according to BNEF’s analysis.
The planned expansion of the carbon market highlights the complexities facing EU policymakers. While it could prove to be an effective mechanism for driving the energy transition and achieving the bloc’s climate objectives, it also adds to expenses at a time when Europe is striving to revive its economy, which is still recovering from the recent energy crisis.
