The disadvantages of emissions trading must be resolved in the EU as soon as possible

The former president of the European Central Bank (ECB) should be dusted off at the latest Mario Draghin from the EU competitiveness report written and published last September.

Although the report’s conclusions about the necessity of a collective debt have been criticized, Draghi’s conclusions about the high energy prices that particularly harm Europe have not been questioned, on the contrary. The success of the EU’s emissions trading has meant expensive energy in the other direction in relation to its main competitors, the United States and China.

The numbers speak for themselves. Industry in Europe pays on average 158 percent more for electricity than industry in China and the United States, and for gas on average 345 percent more than in the United States and about 60-70 percent more than in China.

The difference has worsened in recent years, when the prices of emission rights have risen in five years from the level of 20 euros to the current 60–80 euros per ton of carbon dioxide.

Europe is currently struggling with its economy (KL 28.11.). The threat now is clearly that Europe, with its own climate measures, is excessively raising the costs of companies in relation to competitors who do not have the same burden.

In the EU, the imbalance brought about by emissions trading has been compensated by the free allocation of emission rights. At the same time, it has aimed to prevent the carbon leakage of European industry.

In May of last year, the EU also reached an agreement on carbon tariffs, which are meant to prevent carbon leakage even more effectively. The customs will come into effect gradually during the years 2026–2034. In the same time frame, the free allocation of emission permits that was part of the emissions trade would also end.

The only problem with these actions is that the effects of the tariff increases have been estimated to hit China in particular, but the situation in the United States has been left behind.

Future President of the United States Donald Trump did not mention the EU this week when he announced that he would raise the tariffs of his border neighbors and China, but it is self-deception if Europe does not prepare for it. The EU is the largest trading partner of the United States, and tariffs would be a serious additional blow to companies’ competitiveness.

A market stability reserve was created in the emissions trading system with crises in mind, the operation of which was decided to continue until 2030 a year ago. The goal of the reserve is to match the demand and supply of emission rights in crisis situations, such as the corona pandemic. Now a serious trade policy crisis is looming ahead.

The new Commission should immediately put the reserve into use in order to moderate the energy price level in Europe. Although the situation is not the same in the Nordic countries, the crisis in Central Europe is poison for companies’ exports.

If the market stability reserve does not work efficiently enough, it is worth at least delaying the end of the free allocation of emissions trading.