EU negotiators have agreed to reform the bloc's greenhouse gas emissions trading system to prevent sharp price spikes for consumers at the fuel pump and for home heating.
Negotiators from EU member states and the European Parliament agreed to retain a reserve of emissions certificates for longer and to release more certificates onto the market when prices rise sharply, both sides announced.
Certain companies are required to purchase such certificates to cover their emissions of climate-damaging gases such as carbon dioxide (CO2).
The EU Emissions Trading System (ETS) is an important instrument to fight climate change. It was established in 2005 as an incentive for energy-intensive sectors to cut their output of greenhouse gases.
From 2028, fuels such as petrol and natural gas will also be included in the EU system. The price of certificates will then indirectly influence the cost of heating oil, natural gas, diesel and petrol. Until now, the system has applied primarily to power generation and the industrial sector.
Unused certificates are held in what is known as the Market Stability Reserve (MSR). When too many certificates are in circulation, some are moved into the reserve. When too few are available or the price rises sharply, the reserve releases additional certificates.
Under the agreement, more certificates are to be released once the price exceeds €45 ($52) per ton of CO2. It had originally been planned that the certificates would expire at the end of 2030. The reserve will now be kept in place beyond that date to prevent price fluctuations.
The adjustments "will improve market liquidity, reduce price volatility and strengthen the system's ability to respond to unwarranted price increases," said Maria Panayiotou, the Cypriot environment minister.
In Germany, a national emissions trading scheme already applies to all buildings and transport, in addition to the EU system covering industry and power generation.
