Countries mull delaying new EU carbon market in search of climate deal

By Kate Abnett

BRUSSELS (Reuters) – European Union countries are considering a one-year delay to the launch of a new European carbon market for buildings and transport, pushing back the start to 2027, as they seek a compromise on more ambitious climate policies, draft documents show.

As the 27-country EU seeks to meet tougher emissions-cutting targets, it is negotiating a raft of laws to put a price on pollution – including an upgrade of its existing carbon market for industry and power plants, and a new scheme to impose CO2 costs on suppliers of fuels used in transport and buildings.

Negotiators from EU countries will this week consider launching the new market in 2027, according to a draft compromise proposal seen by Reuters. The European Commission, which drafts EU laws, had proposed 2026.

The policy intends to tackle rising transport emissions and the third of EU emissions generated by fossil fuel-guzzling buildings. But it has worried some countries, which – with an eye on recent soaring gas prices – fear it would raise citizens’ energy bills further.

Diplomats said the 2027 launch – which could change during the negotiations – should not undermine the EU’s climate targets, so long as other parts of the proposal were strengthened.

The delay aims to convince hesitant countries, and is earlier than other options countries had discussed, which Brussels had warned could thwart the EU’s green goals. Revenues from the new carbon market will form a fund to support low-income households.

The proposal, drafted by France which currently chairs meetings of EU countries, would also gradually add shipping to the existing EU carbon market by 2027, a year later than initially planned.

It would maintain other changes to the current carbon market proposed by the Commission, including the rate at which the cap on CO2 permits in the scheme falls each year, and a 2035 phase-out of the free CO2 permits industries receive.

Diplomats will also discuss rules to make it easier to respond to CO2 price spikes, ahead of a meeting later this month where ministers will attempt to agree their stance on the policies, before countries and the EU parliament negotiate the final laws.

(Reporting by Kate Abnett, Editing by William Maclean)