Buildings and transport are the two most crucial sectors to decarbonise to meet EU’s 2030 climate targets. However, they are also have the most directly affect on EU citizens in their daily lives, as the choice to undertake energy renovations or buy a new electric vehicle is a decision that entails a significant cost. Ugnė Keliauskaitė is a research assistant, Ben McWilliams is an affiliate fellow, Giovanni Sgaravatti is Energy and climate research analyst and Simone Tagliapietra is senior fellow at Bruegel.

A major issue underpinning the slow decarbonisation rate in these two sectors so far has been the failure to price externalities. To correct that, the EU introduced with the Green Deal a new carbon market, the Emissions Trading System II (ETS II) internalising the price of CO2 in fossil-fuel use for ambient heating and internal combustion for transport.

We see this as an indispensable policy instrument to speed up EU decarbonisation. After all, the established ETS covering electricity and industrial sectors helped reduce emissions in these sectors by 47% below 2005 levels, putting them on track to achieve the 2030 target of -62%.

However, decarbonising buildings and transport cannot be left to carbon prices only, as this might end-up proving too expensive for final consumers, causing social and political backlash. EU countries need a clear strategy on how they envisage support to consumers and detailing the key policies they want to implement to facilitate green investments before the full introduction of ETS II, in 2027, and until 2030, when prices will float freely.

Source: ECEEE

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