EU eyes new CO2 -cutting ‘trading system ’ for cars and construction

Europe’s car and construction sectors could face increased costs if they do not substantially reduce their carbon footprint.

European Union leaders will gather in Brussels for a special session on May 25 to discuss how to achieve the bloc’s collective 2030 target of cutting harmful greenhouse emissions by at least 55pc compared with 1990 levels.

Binding national targets are among the sticking points.

The EU’s executive arm is mulling creating an additional system of pollution-cutting incentives known as emissions trading for buildings and road transport, according to a document distributed to diplomats in Brussels before the summit.

The aim of this new programme would be to provide “an additional incentive to actors in these sectors to take additional action. 

The April 23 memo doesn’t say whether it will be drivers and home owners, or the car industry and construction companies, who will be on the hook to purchase permits for their emissions.

The planned gradual introduction of tailor-made greenhouse-gas trading systems for housing and transport would come on top of carbon caps for utilities and manufacturers in the existing EU Emissions Trading System (ETS).

It would not interfere with the carbon price in the current ETS, the commission said.

EU carbon permits – certificates which allow the emission of a certain amount of carbon dioxide or other greenhouse gases – reached a new record of €47 per metric tonne last week.

Morgan Stanley predicted that prices could exceed €60, driven by a reform of the emissions trading system in June. The world’s biggest ETS covers 40pc of the EU’s total emissions.

The rest come from sectors that fall outside its scope, including agriculture and land use, waste, road transport and buildings. Raising the bar in these sectors is likely to prove contentious, as poorer members say they cannot afford the costs of the higher goals.

On top of the higher costs for polluting, the commission will propose tougher minimum CO2 standards for new vehicles, and stricter energy efficiency requirements for buildings, the memo said.

The debate among EU leaders comes after the US and the UK unveiled more ambitious emissions-reduction targets for 2030, during a climate summit hosted by US President Joe Biden last week.

Bloomberg