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EU Carbon Tax: Price Spike Rules Extended
18 Feb
Summary
- EU countries will extend carbon price shock regulations beyond 2030.
- New carbon tax on transport and buildings starts in 2028.
- Market Stability Reserve will buffer 600 million allowances.
EU member states have agreed to extend regulations designed to manage carbon price shocks. This measure is in preparation for the new carbon tax that will cover road transport and buildings.
The bloc's mechanism to regulate price spikes will now extend beyond 2030. This aims to ensure the carbon price under the new tax, which is scheduled to take effect in 2028, does not rise excessively.
Households and businesses using fossil fuels for heating and transport may face higher costs when the EU's emissions trading system (ETS2) fully implements. Some countries, like Slovakia and the Czech Republic, have called for a delay until 2030, citing social impacts.
However, Sweden, Denmark, Finland, the Netherlands, and Luxembourg oppose any delays or amendments. They argue such changes would undermine EU climate policy effectiveness and increase investment uncertainty.
The EU's Market Stability Reserve, a tool to balance carbon allowance supply and demand, will be adjusted. Approximately 600 million allowances will be available as a buffer. Under new rules, releases will increase to 80 million allowances twice a year if prices rise sharply, preventing extreme spikes.
This decision by the Council now awaits scrutiny from the European Parliament before final approval. The ETS2 aims to cut emissions from transport and buildings by 42% by 2030 compared to 2005 levels.
