The five blocs dominating Europe’s fight over carbon pricing

Political fissures are emerging as the European Commission finalises a proposal to reform the Emissions Trading System (ETS).

Europe is divided into warring camps over the long-awaited reform of the EU’s flagship carbon pricing system, where industrial interests clash with a real political fear of the negative repercussions of high electricity prices. In 2013, some 2 billion allowances were auctioned, putting a limit on CO2 emissions from power plants and factories that had to purchase them. This limit is being lowered every year, currently standing at around 80 million tonnes, and as permits become scarcer, the price has risen to around €80 per tonne, increasing the economic need for the industry to decarbonise. However, companies have been sounding the alarm lately about the higher costs they face compared to their foreign competitors and have pushed for relief in a revision of the plan, which will be presented on Friday. Some countries are also starting to feel the impact on their electricity bills, most notably Poland, where electricity comes largely from coal-fired power plants and carbon costs account for nearly a quarter of a typical electricity bill.

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