Road transport will be included in the CO2 allowance emission trading scheme

Road transport is one of the most important sectors of the economy and, at the same time, one of the largest sources of carbon dioxide (CO2) emissions in the world. According to data from the European Environment Agency, approximately 25% of the total CO2 emissions in the EU in 2019 came from the transport sector, of which 71.7% was due to road transport.

The policy of reducing CO2 emissions and the EU’s pursuit of climate neutrality by 2050 assume a 90% reduction in greenhouse gas emissions compared to 1990 levels. Meanwhile, transport is the only sector of the European economy in which greenhouse gas emissions have increased over the last 30 years, by as much as 33.5% (1990-2019). Current projections foresee a decrease in transport emissions by only 22% by 2050, well below the ambitious targets set by the EU.

Therefore, the European Union decided to include road transport in the EU’s carbon dioxide emissions trading scheme (EU ETS). In December 2022, an agreement was reached between the Parliament and the European Council on this matter, and this year, EU Member States formally adopted the rules covering road transport with a new, separate Emissions Trading Scheme for road transport and fuels (ETS II), which will be launched in 2027.

What is the EU ETS?

The EU ETS was introduced in 2005 and is considered one of the most important initiatives of the European Union in the field of combating climate change. This system operates on the principle of emission allowance trading, i.e. each entity that produces CO2 emissions must purchase the appropriate amount of emission allowances. In this way, the system aims to reduce CO2 emissions and encourage companies to invest in clean technologies. From the beginning, this system concerned the energy, industry and aviation sectors.

The ETS II

The ETS for road transport, also known as ETS2, is the basis for standards for decarbonising road transport. The European Parliament voted to add commercial fuels to the mechanism. Including road transport in ETS2 can significantly increase the number of electrified cars used in transport, to the benefit of the environment. In addition, the collected funds from carbon dioxide emissions charges, well invested, will ensure faster development of the infrastructure necessary to charge electric vehicles.

The inclusion of road transport in the EU ETS is crucial to achieving the European Union’s climate goals. Enterprises that deal with road transport will have to purchase the appropriate amount of CO2 emission allowances. Each company will be assigned an individual CO2 emission limit, which will decrease every year in order to achieve the long-term goal of reducing CO2 emissions by 55% by 2030.

In addition, the introduction of road transport into the EU ETS also aims to encourage companies to invest in clean technologies and ecological vehicles. In this way, the system will have a positive impact on the development of the car market and transport technologies, which will contribute to reducing CO2 emissions and improving air quality.

Challenges facing the transport industry

The introduction of road transport to the EU ETS met with mixed reactions from entrepreneurs and experts. Some believe that the introduction of this sector into the emissions trading system is a step in the right direction and should help reduce greenhouse gas emissions. Others, however, fear that additional costs incurred by transport companies will be passed on to customers, which will increase transport costs and ultimately affect inflation.

One of the main problems is the need to develop effective and fair methods of calculating CO2 emission allowances. It will be necessary to define precise criteria to take into account differences in emissions between different types of vehicles, as well as depending on the distance and mode of transport activity. It should also be taken into account that road transport is very diverse in terms of size, scope and nature of operations, which can lead to incorrect calculation of allowances.

Another important aspect to consider is the impact of the introduction of road transport into the EU ETS on fuel prices and transport costs. This can be of particular importance for companies operating in the transport sector, which already have to deal with high costs and low margins. It will therefore be necessary to apply appropriate mechanisms to protect against rising costs, as well as to provide support for investments in new technologies and transport infrastructure.

Bringing road transport into the EU ETS will also require changes in government policy and transport regulations. It will be necessary to develop and implement new solutions that will reduce CO2 emissions and accelerate the transformation of the transport sector towards a more ecological and more sustainable development. This will require close cooperation between different sectors of the economy, as well as the involvement of businesses, NGOs and the public.

Europe’s share in global CO2 emissions

Trading schemes similar to the EU ETS also operate in other parts of the world. In 2021, the number of similar mechanisms was 24 (at the regional or national level), e.g. in China and some US states. Unfortunately, these systems, although they share a common idea, differ from each other in the principles of operation. These differences in global competition are a source of unequal competition. Products whose production is burdened with a lower CO2 price than in the EU-ETS are simply cheaper.

The success of the global fight against CO2 emissions will only be achieved through the “teamwork” of all countries and continents. While Europe’s policies have managed to reduce its share of global emissions from 16.8% in 1990 to 7.3% in 2021, few regions in the world can boast similar results. The infamous record holder is China, which is responsible for about 1/3 of the world’s CO2 emissions. Despite numerous investments in renewable energy sources, the country plans to further increase the amount of CO2 emitted into the atmosphere. The effect is that although many countries (including the United States, second only to China) managed to reduce their carbon footprint in 2021, global CO2 emissions increased by 6% to the highest ever level of 36.3 billion tons.