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On May 20, 2021, a firefighter pauses while attempting to put out a fire in the village of Mazi, near Corinth, Greece. Stelios Misinas/File Photo/REUTERS LONDON/BRUSSELS, July 9 (Reuters) – Early opposition to a European Union plan to extend carbon pricing to the gasoline used in cars and to heat homes has been strong, with governments and parliamentarians anticipating public backlash unless supporters can find measures to compensate people who will be most affected. According to leaked drafts, the plan would create an Emissions Trading Scheme (ETS) for transportation and heating, establishing a market price for carbon, which fuel suppliers are expected to pass on to Europe’s half-billion consumers in the form of increased bills. find out more Some capitals have singled out the suggestion, which is expected to be part of a package of recommendations on July 14 aimed at ensuring the EU meets a target of decreasing net emissions by 55 percent by 2030, as something that might harm the poorest in the 27-nation bloc. Some even speculate that it could spark “yellow vest” rallies similar to the frequently violent protests that erupted throughout France in late 2018 in response to an attempt to boost fuel costs. “This is a major risk for the population’s readiness to go through with the transition,” one EU official said, referring to the EU’s goal of transitioning to a climate-neutral economy. “We must proceed with caution.” If it is approved next week, policymakers at the European Commission have promised to include social safeguards, such as putting some revenue from the new ETS into a social fund to help the poor. However, some ask if risking a political reaction for something that will only have an indirect impact on consumer behavior is prudent, especially when the EU is already adopting stronger car CO2 regulations and energy-saving construction rules to reduce emissions in those sectors. “I don’t think it’s worth it to take such a political risk for such a small gain,” Pascal Canfin, chair of the European Parliament’s environment committee and a member of French President Emmanuel Macron’s La Republique En Marche! campaign, told Reuters. Canfin, who caused a sensation in June when he called the measure “political suicide,” called it a “de facto regressive tax” and quoted Commission data suggesting that an ETS for road transport would only reduce emissions by 3%. The European Parliament and member states must negotiate and eventually approve any plan submitted by the Commission. WHO IS THE ONE TO PAY? The EU’s existing carbon market has reduced emissions in the electricity industry, and supporters argue that this success may be repeated elsewhere to encourage consumers to make more environmentally friendly choices. “The most efficient way to encourage businesses and households to reduce emissions is to put a price on carbon,” said Elisabetta Cornago, a research fellow at the Centre for European Reform in Brussels, adding that such policies should aim to redistribute any revenues generated to low-income households. The economic, political, and societal context for next week’s declaration is undoubtedly difficult. The pandemic has worsened existing income gaps, while a year-long market surge in crude oil on the back of prospects of global economic recovery has already pushed energy prices and inflation rates higher. According to polls, the vast majority of Europeans favor the EU’s aggressive emissions-reduction targets. Those who support addressing climate change, however, are hesitant to pay for it directly. According to a recent poll, 75% of Germans oppose raising fuel prices as a means of combating climate change. In theory, a carbon pricing mechanism should be the most politically acceptable means of accomplishing emission reduction goals, as it is less apparent and severe than tax hikes up front. A carbon pollution pricing system in Canada that has been lauded as a model scheme includes a rebate that consumers can claim through their annual tax returns. Taxation, on the other hand, remains largely in the hands of member states in Europe. “The EU simply does not have the competence to make direct payments,” said Michael Bloss, a member of the European Parliament for the German Greens, who wants the EU to focus on companies instead, such as banning the sale of combustion engine cars. OWNERSHIP The Commission has yet to divulge the details of the policy’s social fund to assist people in need, such as customers who are unable to change their travel habits due to limited transportation options or tenants who are unable to replace an inefficient boiler because they rent their property. “It’s too much to ask people to react rationally to price signals unless acts like building repair are made a lot easier and cheaper,” Brook Riley, head of EU affairs for insulation maker Rockwool, said. Another issue is that poorer ex-communist nations in the east, which rely heavily on coal-fired energy, are concerned that an EU-wide pricing will disproportionately affect them. “To minimize negative societal implications, a significant compensation mechanism would need to be in place,” an official from one EU member said, adding that some poorer countries have an older – and thus dirtier – car fleet than the EU average. According to a draft version of the proposal seen by Reuters, the pain will not be felt until after the German election in September and the French presidential election in 2022, two defining occasions for Europe’s future political make-up. It also gives countries plenty of time to prepare, such as by investing billions of euros from the EU’s post-pandemic recovery budget to install electric car charging stations or make buildings more energy-efficient. However, reducing carbon emissions will always come at a cost, and Cornago believes policymakers should make that clear to the public: “It’s critical that the Commission and member states do not allow radical groups to control the headlines.” Anna Wlodarczak-Semczuk in Warsaw and Steve Scherer in Ottawa contributed additional reporting; Mark John wrote the story; and Gareth Jones edited it. The Thomson Reuters Trust Principles are our standards./nRead More

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