High energy costs, new EU shield for transport and households: Parliament votes to curb CO₂ prices

Brussels – The green transition and energy crises must not place a financial burden on citizens. This is the key message that emerged from today’s vote in the European Parliament’s plenary session, where MEPs approved their negotiating position on the new emissions trading system (ETS2) with 433 votes in favour, 120 against and 91 abstentions. The text, which will cover domestic heating and road transport from 1 January 2028, introduces “fundamental safeguards for cost stability.” Emission allowances will be released one month in advance in the event of sudden price spikes, while unallocated allowances will remain in the Market Stability Reserve (MSR) beyond 2031. Furthermore, the price cap of 45 euros per tonne of CO2 is to be extended beyond 2029, and indexed to 2026 prices, rather than 2020. These structural changes are designed to “provide practical help to households in reducing their dependence on fossil fuels without suffering economic shocks,” according to the text.

The new ETS2 system will address CO2 emissions from fuel combustion in buildings, road transport, and small-scale industry not covered by the current EU ETS scheme, at the heart of the European debate. Today’s vote in Strasbourg (29 April) confirms the stance of the Parliamentary Committee on the Environment, Climate Change and Food Safety (ENVI), emphasising the need to “mitigate the social impact of a mechanism that will affect extremely sensitive sectors,” the text continues. MEPs’ strategy envisages injecting liquidity into the market as soon as costs become critical, preventing speculative fluctuations from excessively inflating consumers’ bills.

The European Parliament proposes replacing the immediate cancellation of unused allowances with a phased approach: 50 per cent of the surplus would be cancelled only from 2034, with the process being completed in 2036, subject to an assessment of the system’s adequacy within four years of its launch. The flexibility sought extends to the possibility of granting temporary exemptions: the text calls on the European Commission to assess the option for Member States to exempt residential buildings from the ETS2, provided that alternative and effective national measures have already been adopted to achieve climate targets.

Following the vote, the rapporteur for the text, Danuše Nerudová (EPP), emphasised that “Europe must do more to protect families from the potential negative social impacts” of ETS2. “To steer the revision of the MSR in the right direction, we have proposed concrete measures to extend the €45 cap beyond 2029 and lower it through indexation to 2026 prices,” Nerudová explained, adding that the EU Commission should also assess the possibility for Member States to “temporarily exempt residential buildings and strengthen the Social Climate Fund, so that ETS2 is designed for citizens and enables them to actively contribute to decarbonisation.“

Pending final negotiations with the EU’s national governments, the target date remains 1 January 2028. From that date, ETS2 will become the main instrument for reducing emissions from buildings and transport by 42 per cent within the decade. With the mandate approved today in Strasbourg, MEPs sought to send a signal for a greater “stability reserve capable of responding swiftly to energy market price crises,” ensuring a transition that is both ambitious and sustainable for European households’ budgets.