Another step towards the carbon tax has been taken. On April 18, 2023, the European Parliament voted on comprehensive reforms to the European Union's carbon market, included in the "Fit for 55" package. This is expected to accelerate the reduction of carbon emissions and increase the costs of pollution, i.e., the carbon tax, across Europe, as reported by Reuters.
The European carbon market shows continuous changes due to the fluctuating prices of emission allowances (EU ETS). The EU ETS is the market for carbon emission rights operating in EU member states. Its aim is to encourage businesses to adopt eco-friendly technologies and reduce carbon emissions.
The EU ETS market price has shown significant fluctuations over the past three years due to various factors. The table below presents the price trends in six-month intervals:
(Date, EU ETS Price (EUR/ton))
2018. January - 8,6 EUR/t
2018. July - 16,6 EUR/t
2019. January - 24,4 EUR/t
2019. July - 28,5 EUR/t
2020. January - 24,1 EUR/t
2020. July - 28,3 EUR/t
2021. January - 34,4 EUR/t
2021. July 57,5 EUR/t
2022. January 80 EUR/t
2022. July 86 EUR/t
2023. February 100,3 EUR/t
The data shows that the EU ETS price has significantly increased over the past three years. This price rise is partly due to the introduction of the carbon tax, which has become increasingly prevalent in the European Union in recent years. The carbon tax increases the cost of carbon emissions, affecting the EU ETS market price as well.
Several proposals have been made recently to transform the EU ETS market. For example, the European Commission has proposed reducing greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. Additionally, expanding the EU ETS market to more accurately reflect the true costs of emissions has been considered.
Lawmakers also agreed to launch a new EU carbon market in 2027, which would cover emissions from fuels used in vehicles and buildings. Furthermore, they approved a plan to establish a Social Climate Fund worth nearly 87 billion euros by 2026 to ensure that the climate transition is fair to all members of society, mitigating the risk of energy poverty, according to a Parliament statement.
These reforms were agreed upon by representatives of the European Parliament and member states last year. Final approval from the EU countries is still required for the reforms to take effect, which is expected in the coming weeks.
The transformation of the EU ETS market is ongoing, and the introduction of the carbon tax is impacting prices. Further price increases are expected, which will encourage businesses to accelerate their environmental sustainability developments.
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