Road transport in the EU ETS: A high-risk, low-reward strategy

(EurActiv, 10 Jan 2020) The Emissions Trading Scheme (ETS) is not a good instrument to cut road transport emissions because it will raise petrol prices and fuel popular discontent, as seen in the past with the ‘Gilets Jaunes’ protests, writes William Todts. Road emissions are best addressed with standards, he argues.

Late last year, Ursula Von der Leyen announced a sweeping plan to green Europe’s economy. The plan includes measures to restore nature, protect biodiversity, reduce air pollution and make Europe climate neutral by 2050. We welcomed the green deal but warned that Von der Leyen’s plan to extend the bloc’s emissions trading system, known as ETS, to road transport is a distraction at best. Why?

Getting the prices right has always been at the heart of our work. We’ve worked on fuel taxes, road charging, abolition of harmful subsidies and the like for decades. This is because we value the nudge price signals provide and the long term impact they have on things like how many kilometers people drive (compared to Europeans, Americans consume three times more fuel per capita), how much they fly or the type of vehicles people buy. We also think taxing polluting transport is economically smarter than taxing labour or other productive activities.

So as environmentalists we are supportive of carbon pricing. And yet, we remain profoundly sceptical (as well as many other NGOs and consumer groups) about including road transport in the EU ETS (aviation and shipping are different, see below).

The first and fundamental problem is that the EU ETS pretends to be much more than just a carbon price. Through its cap and trade dynamics, the ETS supposedly fully regulates emission reductions in all sectors it covers. In theory that reduces the space for, and need for other policies such as mandates, national carbon taxes and the like.

Despite all Timmermans’ assurances to the contrary, the EU ETS does compete politically with CO2 standards. The EU ETS inclusion was always promoted as the solution to transport emissions by German carmakers, economists and conservative politicians. The recent renewed push, once again, comes from Germany and its mighty auto industry (VDA). Sure, we have standards for 2021, 2025 and 2030. But these are inadequate. Carmakers, oil companies and their political friends across Europe will argue that ETS inclusion eliminates the need for increased vehicle CO2 ambition.

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EurActiv, 10 Jan 2020: Road transport in the EU ETS: A high-risk, low-reward strategy