{"id":471443,"date":"2026-03-12T12:28:08","date_gmt":"2026-03-12T12:28:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/471443\/"},"modified":"2026-03-12T12:28:08","modified_gmt":"2026-03-12T12:28:08","slug":"five-reasons-why-attacking-the-eu-carbon-market-is-economic-self-sabotage","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/471443\/","title":{"rendered":"Five reasons why attacking the EU carbon market is economic self-sabotage"},"content":{"rendered":"

The last few weeks have witnessed mounting attacks on the European Union\u2019s key climate policy instrument: the emissions trading system (ETS). A major push has come from energy-intensive industries, but also from several European governments, including Italy, which has even called for a suspension of the system<\/a>. However, watering-down the ETS would not save European industry; rather, it would be a blow to both fiscal stability and long-term economic resilience. This debate will continue as EU leaders convene at the European Council on 19\u201320 March in Brussels to discuss the future of European competitiveness. The following five points show how undermining the ETS would harm \u2013 not benefit \u2013 EU economic competitiveness.<\/p>\n

1. The ETS is a remedy for electricity price volatility, not the cause of it\u00a0<\/p>\n

The current political debate often proceeds as if European electricity prices are still at crisis levels. In reality, prices have largely stabilised at pre-crisis levels, even accounting for the jump in electricity prices following United States-Israel action against Iran. Yet the misconception persists that the ETS drives higher electricity costs. Natural gas \u2013 not the carbon price \u2013 is the dominant factor in setting marginal electricity prices.<\/p>\n

The only sustainable way to lower electricity costs is to reduce the number of hours during which gas sets the marginal price. This entails accelerating the deployment of renewables. Watering-down the ETS would disrupt confidence in the system, deter private investment and prolong dependence on expensive and geopolitically risky imported gas.<\/p>\n

2. Policy reversals create a \u2018laggard\u2019s dividend\u2019 at the expense of innovators<\/p>\n

Europe\u2019s industrial competitiveness problem is not a result of carbon pricing, but rather of a broader failure to manage technological transformation. If policymakers reverse course on the ETS, they will effectively penalise the frontrunners who invested early in decarbonisation while rewarding the laggards who resisted change. If companies believe that political pressure can simply \u2018wave away\u2019 the cost of carbon, they will stop investing in the low-carbon technologies of the future. To borrow Mario Draghi\u2019s words<\/a>, this would condemn EU industrial competitiveness to prolonged \u2018slow agony\u2019.<\/p>\n

3. The hidden fiscal cost of watering down the carbon price<\/p>\n

Weakening the ETS would bring two fiscal penalties that its proponents appear to overlook. First, it would directly reduce the auction revenues that EU countries can and should use to fund industrial transition and social support. Since inception, ETS auctions have raised over \u20ac258 billion in revenues<\/a>, an amount that will keep growing as the carbon price increases.<\/p>\n

Second, because many renewable energy projects are supported through instruments called contracts for difference<\/a>, a lower carbon price often forces electricity prices down in the short term, which paradoxically increases the subsidy gap governments must fill. For Germany alone, a 10% reduction in wholesale electricity prices would increase the cost of renewables support by some \u20ac3 billion to \u20ac4 billion per year. By attacking the ETS, policymakers are inviting adverse impacts on their own national budgets.<\/p>\n

4. Preventing a rent shift to fossil-fuel exporters<\/p>\n

Perhaps the most overlooked economic benefit of the carbon price is its role in aggregating EU demand for fossil-fuel imports. By making carbon-intensive energy more expensive, the ETS reduces gas consumption across a massive market. Because the EU imports huge volumes of gas, primarily as liquified natural gas (LNG), this reduced demand puts downward pressure on global LNG prices, meaning that part of the carbon \u2018tax\u2019 is effectively paid by the exporters. Dropping the ETS would signal to consumers that they do not need to reduce consumption, and to other importers that they should also subsidise their gas consumers, putting upward pressure on global gas prices. The carbon market revenues that previously went to European budgets would then be sent abroad as pure profit for LNG exporters.<\/p>\n

5. Undermining a valuable institution has long-term cost<\/p>\n

The ETS is a mature, unified, market-based framework that ensures a level playing field across the EU\u2019s single market. Undermining this would trigger dangerous fragmentation, forcing EU countries to revert to a patchwork of national subsidies and contradictory regulations, causing major market distortion.<\/p>\n

The ETS is an ally, not an enemy, of Europe\u2019s competitiveness<\/a>. Rather than dismantling it, EU leaders should strengthen the system as the central pillar of clean industrial policy. While adjustments are possible, the system\u2019s long-term credibility must be protected. Any watering down of the carbon price signal would destroy the investment certainty that frontrunners and innovators rely on. Strengthening the ETS first and foremost requires making strategic use of the scheme\u2019s multi-billion euro revenues to secure Europe\u2019s future prosperity.<\/p>\n","protected":false},"excerpt":{"rendered":"The last few weeks have witnessed mounting attacks on the European Union\u2019s key climate policy instrument: the emissions…\n","protected":false},"author":2,"featured_media":471444,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[1397,90,56,54,55],"class_list":{"0":"post-471443","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-environment","8":"tag-environment","9":"tag-science","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/471443","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=471443"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/471443\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/471444"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=471443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=471443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=471443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}