A European Union plan to extend carbon pricing to fuel used in cars and heating homes faces an early wall of resistance from countries and lawmakers fearing a public backslide unless the Donors do find ways to compensate those most affected.

According to leaked plans, the scheme would set up an Emissions Trading System (ETS) for transport and heating, creating a market price for carbon – a price that fuel suppliers are likely to pass on. over half a billion European consumers in the form of increased bills.

Scheduled to be part of a package of July 14 proposals to ensure the EU meets a 55% net emissions reduction target by 2030, it has been singled out by some capitals as something that could hurt the EU. poorest of the 27 countries. block.

Some even mention the possibility that it will trigger movements of “yellow vests” such as the often violent demonstrations that have spread across France from the end of 2018 after an attempt to increase taxes on fuel.

“It is a great risk to the will of the people to move forward with the transition,” said an EU official, of the EU’s goal of moving towards a climate-friendly economy. neutral.

“We have to walk very carefully.”

If they move forward next week, European Commission policy writers promise to add social protections, including funneling some revenue from the new emissions trading system into a social fund to support needy.

But critics question whether it is wise to risk a political backlash for something they say will only indirectly influence consumer behavior, especially when the EU is already setting stricter CO2 standards for consumers. cars and energy saving requirements for buildings to reduce emissions in these sectors.

“Taking such a political risk for a limited gain, I think it’s not worth it”, Pascal Canfin, member of La République en Marche of French President Emmanuel Macron! movement and chairman of the European Parliament’s environment committee, told Reuters.

Canfin, which caused a sensation in June by declaring the plan “political suicide”, called it a de facto regressive tax and cited a Commission analysis itself suggesting that an ETS for road transport would reduce emissions from fuel. ‘barely 3%.

Any plan proposed by the Commission must be negotiated and ultimately approved by the European Parliament and the Member States.

WHO PAYS?

The EU’s existing carbon market has reduced emissions in the electricity sector and proponents say the success can be replicated elsewhere, to encourage consumers to make greener choices.

“A carbon price is the most effective way to encourage businesses and households to reduce their emissions,” said Elisabetta Cornago, researcher at the Center for European Reform in Brussels, adding that such policies should aim to redistribute income generated to low-income households. .

The economic, political and social context of next week’s announcement is certainly difficult.

A year-long rally in the crude oil market amid hopes of a global economic recovery has already pushed energy prices and inflation rates up, as the pandemic has exacerbated existing wealth inequalities .

Polls show that a large majority of Europeans support the EU’s ambitious emission reduction targets. But even those who support the fight against climate change are reluctant to pay directly for it.

A poll last month found that 75% of Germans reject rising fuel prices as a way to fight climate change.

In theory, a carbon pricing mechanism should be the most politically acceptable way to meet emission reduction targets – less visible and drastic than initial tax increases.

In Canada, a carbon pollution pricing system hailed by some as a model system included a refund that people can claim through their annual tax returns. But in Europe, taxation remains largely in the hands of member states.

“The EU simply does not have the competence to grant direct payments,” said Michael Bloss, a European Parliament lawmaker for the German Greens, who urges the EU to target businesses instead, for example by banning sales of cars with combustion engines.

OWN

The Commission has yet to reveal details of the social fund’s policy to support people in need, such as consumers who cannot change their travel behavior due to limited transport options or because they are renting. their home and therefore cannot replace an inefficient boiler.

“It’s too much to expect people to react rationally to price signals unless actions like building renovations are made much easier and cheaper,” said Brook Riley, head of EU affairs. for insulation maker Rockwool, who said ETS revenue should be used for such measures. .

Another challenge is that poorer ex-communist countries in the east that rely more on coal-fired energy fear that an EU-wide price will hit them harder.

“A strong compensation mechanism should be in place to minimize negative social consequences,” said an official from an EU country, adding that some poorer countries have older – and therefore dirtier – car fleets. than the EU average.

Since transport and heating will only have to face CO2 costs in 2026, according to a preliminary version of the policy seen by Reuters, the spur will only be felt after the German elections in September or the French presidential race in 2022, two decisive moments for the future of Europe. political constitution.

It also leaves enough time for countries to prepare, for example by using the billions of euros available from the EU’s post-pandemic recovery fund to build charging stations for electric cars or to make buildings more fuel efficient. energy.

But reducing carbon emissions will always come at a price, and Cornago said policymakers should explain it to the public: “It is important that the Commission and Member States do not let extreme parties run the headlines.”



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