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Carbon price for homes and cars could prove ‘very controversial’, senior EU official admits

A heat pump is installed at a house in Frankfurt, Germany
A heat pump is installed at a house in Frankfurt, Germany Copyright Michael Probst/Copyright 2023 The AP. All rights reserved
Copyright Michael Probst/Copyright 2023 The AP. All rights reserved
By Robert Hodgson
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While public awareness of an incoming carbon price for home heating and motor fuels remains low, the European Commission is aware it may become a hot political issue for the next EU executive.

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A new emissions trading system (ETS) adding a carbon price to the cost of fossil fuels used to heat homes and power road transport, could prove a headache for the next European Commission, a senior official has acknowledged.

“I think certainly it will be an inflection point,” the head of cabinet to EU energy commissioner Kadri Simson said on Monday (24 June) of the levy due to take effect in 2027. “It may become very controversial,” Stefano Grassi said during a policy discussion hosted by Euronews.

“In our analysis, most of the burden will not be sustained by citizens or final consumers, but mainly by intermediaries and traders,” Grassi said, noting that a new Climate Social Fund will allow governments to use part of the revenue from the new carbon pricing system to soften the blow for poorer and vulnerable citizens.

“I don't think we will be looking at rocketing bills,” the EU official added when asked about potential also for anger among the middle classes. “Prices in the gas market after 2026 will be bound to decrease further, because there will be a more abundant supply of [liquefied natural gas] LNG.”

The impact of the current EU ETS, in place since 2005, has largely been restricted to electricity generators, with the increasing price they must pay for every tonne of CO2 they emit encouraging a switch first from coal to gas, then to renewable sources of power such as wind and solar.

A proposed carbon tax notoriously sparked the series of ‘yellow vests’ protests across France five years ago, whose impact is still being felt. An MEP from the centre-right European People’s Party, now flush with electoral success, recently warned of a potential “very violent outburst of anti-European public reaction” when householders become aware of the ETS 2.

The Commission official’s comments came during a discussion of a new report from Solar Power Europe, a trade association representing the interests of the solar photovoltaic (PV) industry in Brussels, which warned that a targeted near-doubling of the share of renewable energy to 42.5% in 2030 could be wasted without parallel measures to reinforce the power grid and increase demand.

The industry group argues that the ambitious EU target to increase deployed solar PV capacity from 269 GW to 750 GW by 2030 will require an urgent roll-out of ‘flexibility’ solutions such as on-grid battery storage, digitalization and hydrolysers for green hydrogen production to ensure electricity grids can absorb the huge increase in variable output from weather-dependent power sources.

Speakers noted that the ambitious EU renewables targets will also require an acceleration of the transition away from fossil fuels in key areas such as heating and transport – the ETS 2 is specifically designed to encourage a switch from gas boilers to heat pumps and from petrol cars to all-electric models  – as well as industrial processes.

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