Veyt has a new forecast for EU ETS 2 Allowance (EUA 2) prices, the units that will be used to comply with emissions stemming from burning fuels for road transport, heating of buildings, and for small-scale industries.
As of 2025, fuel providers – the entities liable under the new system – are obliged to report emissions annually. The system will come into full operation in 2028, when they will also need to surrender emission allowances (EUA2s) to account for the CO2 inherent in the fuels they sell.
They will be able to purchase physical EUA2s (the actual allowances or permits) once the auctions start in 2027. In the meantime, there will be EUA2 futures contracts available. ICE launched its contracts on 6 May, price settled at EUR €73.57/t.
Essentially, the European Emissions Trading System 2 (EU ETS 2) aims to put a cost on emissions from road transport and heating/cooling of houses/building. Most EU member states have struggled to incentivize a shift from internal combustion engines and gas-based heating. One notable exception is the Nordic countries (Finland, Norway, Sweden), which have achieved a lot through a combination of taxes and subsidies) but for political and/or financial reasons that approach is not available to all member states.
As part of the FF55 revision for 2030, the Commission insisted on making these two sectors subject to carbon pricing to spur abatement across Europe. European lawmakers were skeptical, fearing a repeat of the yellow vest protests in France in 2018, triggered by a proposed (later cancelled) hike in petrol taxes.
Eventually, they reluctantly agreed to create EU ETS2, a key element in the latest ETS revision that was formally adopted in May 2023. Throughout 2024 and 2025, we have seen mounting opposition to ETS2 from several member states and MEPs, all of whom are afraid of political backlash against the green transition.
Veyt’s forecasted prices — if realized — would translate into major increases in petrol prices across the EU. For a selection of country-specific effects, see the graph below.
Under an assumption of 100% cost pass-through, all countries will experience the same absolute increase in petrol prices. However, countries with lower existing fuel taxes, such as Poland and Hungary, will see a significantly larger percentage increase.
The broader impact on consumers will also depend on the adoption rate of electric vehicles (EVs). A faster EV uptake would shield a larger share of consumers from EU ETS2-related price increases. As illustrated in the graph below, our model forecasts rapid EV adoption, with the EU-wide share rising to 26% by 2030 from just 2% in 2024. While ETS2 prices contribute to this acceleration, our analysis indicates that significant growth in EV adoption would occur even without EU ETS2, as can be seen from the increase we see prior the 2027 when the market starts.
That said, the pace of uptake will vary across countries. In the chart below, we highlight a selection of examples. Unsurprisingly, Norway—already a global leader in EV adoption—is projected to remain ahead, with 51% of cars expected to be electric by 2030. Germany will see a steady increase and serve as a proxy for the EU average, while Italy is expected to lag behind in comparison.
A similar pattern holds for the buildings sector. As shown in the first graph below, EU ETS2 price levels would drive a substantial rise in heating costs across Europe, with the largest percentage increases in countries with low existing energy taxes.
The overall impact will depend heavily on how quickly households transition to cleaner heating technologies. As shown in the second graph, we expect a rapid increase in the EU-wide adoption of heat pumps—reaching XX% by 2030 from XX% today. Importantly, much of this growth occurs even before the EU ETS2 formally begins in 2027.
The third graph highlights national variation. Sweden is projected to maintain its lead, while countries like Germany follow the EU average and others, including Italy, lag behind.
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