Inclusion of road transport into
the EU Emissions Trading System
How and with which impact?
Road transport needs to contribute to the European Union’s endeavour to achieve a 55% greenhouse gas emission reduction by 2030 and climate neutrality by 2050.
Decarbonisation measures in road transport need to make the desired change reliable and affordable for consumers.
Consumer acceptance is particularly important for the success of the transformation to greenhouse gas neutral mobility.
Emissions trading can be an appropriate instrument to curb emissions in road transport under certain conditions.
The European Commission is about to propose applying emissions trading to road transport.
The FIA European Bureau has commissioned an expert study on the conditions and impacts of such an inclusion.
Following the study findings, the FIA European Bureau recommends to include road transport
into the EU Emissions Trading System under the following conditions:
A wider scope of the EU ETS with full integration of road transport and the tradability of certificates guarantee that CO2 reduction happens at lowest costs.
Making the reform financially neutral
for consumers
As road transport already pays higher implicit carbon taxes than any other sector, a tax reform is needed to progressively lower existing fuel taxes so that carbon permit prices can really play their role.
Avoiding multiple pricing
Rebalancing distributional
effects
Flanking policies are necessary (at national level) to compensate those who are impacted disproportionally.
Boosting innovation with complementary policies
The expert study sketches the European climate context and the existing policy instruments addressing the CO2 emissions from road transport.
After describing how emissions trading for road transport can be set up, the main system options and the interactions with the existing policy instruments, it goes on analysing the impact of the most relevant policy options on CO2 emissions, abatement costs and on the incentives for technological innovation.
It eventually analyses the economic and social impact on road transport users, fuel suppliers, the other EU ETS sectors and governments.
Reducing CO2 emissions at lowest costs
Study finding
From an economic point of view, the inclusion of road transport in the existing EU ETS seems the best scoping option, by pricing each tonne of CO2 equally.
By making use of the tradability of allowances and the differences in abatement costs, the EU ETS delivers CO2 reduction in a cost-efficient way.
Making the reform financially neutral for consumers
Study findings
Road transport currently pays higher implicit carbon taxes than any other sector. As long as that is the case, a tax reform is needed to progressively lower existing fuel taxes so that carbon permit prices can really play their role.
A carbon price on top of existing taxation is not able to correct relative prices and to remove the distortions caused by these differences in implicit carbon prices
Avoiding multiple pricing
Study findings
Pricing instruments such as energy taxation or plans to introduce a CO2 element into the Eurovignette Directive are to be revised, as the EU ETS carbon price would be taking over the climate policy function in a more efficient way.
Road transport should be removed from the Effort Sharing Regulation and the Energy Efficiency, as the EU ETS takes over this function.
Rebalancing distributional effects
Study findings
Energy demand price elasticity in road transport is low and price increases have a disproportionate impact on low-income households.
Flanking policies are necessary to compensate those who are impacted disproportionally.
Boosting innovation with complementary policies
Study findings
The presence of other policy instruments can also strongly incentivise innovation in the vehicle and fuel sectors.
Vehicle CO2 emission standards, the targets for low carbon fuels with sustainability criteria, and investments in alternative charging and fuelling infrastructure as well as subsidies for R&D and demonstration projects are complementary to the EU ETS.