In his article on energypress, titled “The weakening of ETS2 as a risk for the European climate strategy”, Nikos Mantzaris analyzes the recent announcement by the European Commission to consider changes to the new Emissions Trading System (ETS2) for buildings and road transport, following a request from 19 Member States, including Greece.
As he points out, the attempt to limit carbon prices in the name of social sensitivity carries serious risks for the EU’s overall climate strategy. Lowering the price of emission allowances may offer short-term relief, but it also reduces the resources available for permanent solutions such as energy efficiency upgrades, electrification of heating, and sustainable mobility. In other words, cheaper carbon today means greater dependence on fossil fuels tomorrow.
Nikos Mantzaris reminds us that artificially reducing carbon prices in the past led to higher emissions and delayed green investments, as seen during the 2005–2018 period of the first ETS. Instead of repeating the same mistakes, he emphasizes that the real solution already exists within the EU framework: the Social Climate Plans, which allow Member States to support vulnerable households and small businesses through targeted measures.
He concludes that Europe stands at a critical crossroads. It can either remain committed to its zero-emission strategy, making use of the tools it already has, or undermine its own credibility by delaying the green transition and ultimately burdening its citizens.
Read the full article published on energypress [in Greek] here.
English version below:
Weakening ETS-2: A Risk to Europe’s Climate Strategy
by Nikos Mantzaris, policy analyst & co-founder of Green Tank
The European Commission, through Climate Commissioner Wopke Hoekstra, announced that it will respond to a request from 19 member states—including Greece—to amend EU legislation governing the new Emissions Trading System (ETS2) for buildings and road transport.
This request, presented in an informal non-paper, reflects concerns that implementing ETS2 will disproportionately burden households and businesses by increasing heating and transport costs through higher fossil fuel prices.
In response to these pressures, Commissioner Hoekstra stated that the Commission intends to adjust the rules governing the Market Stability Reserve (MSR), which determines the supply of emission allowances and thus affects prices on the new carbon market. The goal is clear: to limit the price of allowances and, consequently, reduce costs for citizens.
At first glance, this move seems reasonable. If fuel costs are expected to rise, why shouldn’t the EU step in to ease the burden on households? Yet behind this “socially sensitive” approach lie serious economic, environmental, and geopolitical side effects.
Temporarily lowering prices reduces resources for permanent solutions
Cutting the price of allowances eases financial pressure in the short term but also reduces the revenues member states would have available to invest in the green transition.
Revenue from ETS2 auctions is specifically intended for projects that can permanently lower energy costs: energy efficiency upgrades, electrification of heating, solar PV installations, or sustainable mobility initiatives. These are the projects that can free households and businesses from fossil fuel dependence—not just provide temporary relief.
For instance, in Greece, if the average allowance price reaches €84/ton between 2027 and 2032, revenues would total €6.34 billion. If the price drops to €45/ton, revenues fall to €2.75 billion. The €3.59 billion difference is enough to renovate nearly 36 million square meters of housing, install 9,000 MW of heat pumps, or 2 GW of solar PV. In other words, “cheaper” carbon today means fewer permanent solutions and greater dependence tomorrow.
The risk of repeating past mistakes
Artificially lowering the carbon price through direct market interventions can also increase greenhouse gas emissions—repeating mistakes of the past.
The EU has already paid a high price for a similar policy choice. From 2005 to 2018, during the first Emissions Trading System (ETS1), allowance prices were kept artificially low to shield lignite- and coal-fired power producers. The result was millions of additional tons of CO₂ in the atmosphere and, worse, new investments in polluting plants that cannot be recovered, such as the well-known Ptolemaida 5 in Greece.
When prices finally soared after 2018, consumers had to bear the cost of these misguided choices. If ETS-2 prices are artificially capped today, we risk repeating the same vicious cycle: cheap carbon, delayed investments, rising emissions, and ultimately higher energy costs for everyone.
There is a better solution
If the goal of the 19 member states is genuinely to mitigate the social impacts of ETS2, weakening the mechanism is not the way. Instead, they should leverage the tools already provided under EU law: Social Climate Plans (SCPs).
SCPs allow each member state to fund targeted investments and social policies—such as subsidies for energy efficiency upgrades, heating electrification, or sustainable mobility programs. The faster these measures are implemented, the lower the demand for allowances—and, consequently, their market price. In other words, the solution already exists within the system, not outside it.
Paradoxically, none of the 19 member states requesting legislative changes have yet submitted their Social Climate Plans on time. How can one claim to protect citizens from ETS2 while failing to use the primary tool at their disposal?
Europe at a critical crossroads
The stakes go far beyond whether the allowance price is €45 or €84. They touch the very core of the European Green Deal and the EU’s credibility in meeting its climate targets.
If the Union starts dismantling its policies before they are even implemented, either to appease geopolitical pressures from across the Atlantic or to further support the fossil fuel industry, a socially just transition to a climate-neutral economy will remain wishful thinking.
Europe faces two choices: either stay true to its net-zero strategy, using the tools it already has, or repeat past mistakes, delaying the transition and ultimately burdening its own citizens.
