EU leaders clash over carbon market as Nordics warn against weakening it

BRUSSELS · The European Union's carbon market was a major point of contention at a summit of EU leaders in Brussels on Thursday and Friday, exposing deep divisions over climate policy. Leaders of Finland, Denmark and Sweden warned that weakening the Emissions Trading System would undermine investment in clean technologies. They faced opposition from the Visegrad group of Hungary, Slovakia, the Czech Republic and Poland, which was backed by Italy and Greece and sought to delay a new version of the carbon market. In lengthy debates that ran late into Thursday night, the Nordic members argued the ETS is crucial for reducing emissions and funding the green transition. "Any weakening of the ETS would undermine the predictability on which investment decisions depend and risk slowing the pace of industrial decarbonisation," stated a letter from the three Nordic countries seen by Euronews. They said cutting ambition would shift the burden of emission reductions to other, more difficult sectors of the economy.

Czech Prime Minister Andrej Babis sharply attacked the ETS and carbon taxes, blaming carbon market speculators for harming Europe's competitiveness. "Someone is making billions at the expense of the European industry, which is in decline and which of course has major problems," Babis told reporters on Thursday. He said EU climate policies are "ideological stuff" that ignore economic realities and argued carbon allowance prices have skyrocketed past forecasts. The Emissions Trading System makes companies pay for their pollution, aiming to reduce emissions and encourage investment in sustainable alternatives. Since 2005, emissions from covered industries have dropped by 51%, according to the European Commission. The system currently covers heavy industries, power plants, airlines and shipping, with plans to include more sectors like international aviation and landfills.

Countries backing the ETS see it as an enabler of decarbonisation, both through raised revenues and by encouraging heavy industry to invest in green technologies to avoid higher costs. "(The ETS) has played an important role in decarbonisation. We must now maintain the price signal and ensure the scheme continues to function by implementing corrective measures," a second EU diplomat told Euronews. The diplomat added that structural mechanisms must be preserved while providing short-term flexibility for the most affected member states. However, a plan by the four Visegrad countries, supported by Italy and Greece, to delay the new Emissions Trading System for buildings and road transport until 2030 hit a wall late Thursday. They argued that households and small businesses would face higher costs and that price differences between EU regions, particularly in Eastern Europe, are enormous. This new carbon market, known as ETS2, is set to cover fuels used in road transport and buildings starting in 2029.

Despite the concerns raised by the six countries, one EU diplomat told Euronews that their proposed amendments "would never get the required unanimity". "There is little support for it and they know it. That's why they try it at the European Council instead of the Environment Council because there's no majority there for this," another diplomat said. Nonetheless, the six countries succeeded in requesting an impact assessment on ETS2's design and safeguards, which the Commission will handle. EU leaders invited the European Commission to examine further short-term interventions and urged EU lawmakers to accelerate work on the Market Stability Reserve. This mechanism governs the supply of allowances in the ETS with the aim of limiting carbon-market price volatility. The current geopolitical shock from high energy prices is being used as leverage by member states to recalibrate carbon market rules, with fossil-heavy nations pushing for lower carbon price pressures and green-forward nations demanding steadfast transition timelines.

With files from Yahoo News