Another step towards a carbon tax. On April 18, 2023, the European Parliament voted in favor of comprehensive reforms for the European Union's carbon dioxide market, included in the Direction towards 55% package of measures. As a result, carbon dioxide emissions are expected to decrease more rapidly, the costs of environmental pollution will decrease, and carbon taxes will be raised across Europe - as reported by Reuters.
The European carbon dioxide market experiences continuous changes due to the fluctuation of emission allowances (EU ETS) prices. The EU ETS is the market for carbon dioxide emission rights operating in the European Union member states. The market's goal is to encourage businesses to adopt environmentally friendly technologies and reduce carbon dioxide emissions.
The price of the EU ETS market has shown significant fluctuations over the past three years, influenced by various factors. The table below presents the price evolution in six-month intervals: Date EU ETS price (euros/ton)
January 2018 - 8.6 EUR/t
July 2018 - 16.6 EUR/t
January 2019 - 24.4 EUR/t
July 2019 - 28.5 EUR/t
January 2020 - 24.1 EUR/t
July 2020 - 28.3 EUR/t
January 2021 - 34.4 EUR/t
July 2021 - 57.5 EUR/t
January 2022 - 80 EUR/t
July 2022 - 86 EUR/t
February 2023 - 100.3 EUR/t
Based on the above data, it can be seen that the EU ETS price has experienced significant increases over the past three years. The price hikes are partially attributed to the introduction of the carbon tax, which has become increasingly prevalent in the European Union in recent years. The carbon tax increases the price of carbon dioxide emissions, which in turn affects the EU ETS market price.
Several proposals have been made for the transformation of the EU ETS market in recent times. For instance, the European Commission suggested reducing greenhouse gas emissions by at least 55% compared to 1990 levels by 2030. Additionally, expanding the EU ETS market has been discussed to more effectively reflect the actual costs of emissions.
Lawmakers also agreed to launch a new EU carbon dioxide market in 2027, which would cover emissions from fuels used in vehicles and buildings. Furthermore, representatives accepted an agreement that foresees the establishment of a social climate fund worth nearly 87 billion euros by 2026, aimed at ensuring climate transition is fair to all members of society, while reducing the risk of energy poverty - as stated in the Parliament's press release.
The reforms were agreed upon by the European Parliament and representatives of the member states last year. Final approval from EU countries is still required for implementation, expected in the coming weeks.
Therefore, the transformation of the EU ETS market is underway, and the introduction of the carbon tax is influencing prices. Further price increases are anticipated, incentivizing businesses to accelerate their environmentally conscious developments.