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EU Carbon Market Plan Could Hike Diesel Price 50 Cents/L — Study

Originally published on Transport & Environment.
By Eoin Bannon

Low-income families could be hit with diesel price hikes of 50c a litre, and a doubling of home heating bills, on average, in 2030 if the EU relies only on carbon markets to achieve emissions cuts in road transport and homes, new research published today shows. The EU carbon price would reach an estimated €180 a tonne by 2030 under such a plan, a study by Cambridge Econometrics finds. 

EU leaders discussing today how to achieve the bloc’s 2030 climate goals should not make a transport carbon market the centrepiece, said Transport & Environment (T&E). They should instead rely on national climate targets, stringent CO2 standards, and a much lower carbon price with visible and generous compensation for low- and middle-income families

In France, where diesel tax rises triggered the gilets jaunes protests, road fuel prices would increase 35% in 2030 if the EU carbon market is the main method used to achieve emissions reductions targets, the study finds. Gas heating costs would almost double (92%). In Germany, where gas prices are relatively low today, gas heating bills would increase by 135% and road fuel prices by 32%. In Poland motorists would pay 31% more to fill up by the end of the decade, while gas heating would cost 70% more, and coal 188% more.

Sofie Defour, climate manager at T&E, said: “This study shows how foolish it would be to rely only on carbon markets to clean up transport. There is a role for carbon pricing but that’s mainly in support of more effective policies like car emissions standards, and certainly not at these price levels. The EU’s Green Deal can be an example to the world of how to do a swift and just transition, but only if it uses the right tools.”

Increasing national climate targets – which would oblige governments to phase out fossil-fuel company cars, invest in clean modes like rail, and take other measures – is a much more effective and equitable way of meeting the 2030 climate goals, the study finds. The EU could increase disposable incomes across society and grow the economy 2% (GDP) if it relies more on national climate targets to meet its 2030 goals.

T&E said a capped carbon price – at EU or national level – could help reduce emissions from road transport, but only in tandem with legally binding and ambitious national targets under the Effort Sharing law. Revenues raised through a limited carbon price would need to be invested in low-carbon technology – like retrofitting buildings – but should also be ‘recycled’ back to citizens through discounts on electricity bills or ‘climate dividend’ payments.

Sofie Defour said: “The heavy lifting needs to come from things like emissions-free cars, rapid electrification and building up a world-class charging network. That can be delivered by increased national climate targets, stringent pollution limits for cars and buildings and a carbon price that brings people on board by starting slow and giving back the money.”

Today EU leaders will tell the European Commission which methods it should use to achieve the bloc’s target of a 55% reduction in emissions by 2030. The Commission will make a proposal on the future of national targets and the Effort Sharing Regulation on 14 July. Last month a poll found over two-thirds of EU citizens want their country’s climate target raised.

Study: Exploring the trade-offs in different paths to reduce transport and heating emissions in Europe

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