Carbon Tax: Fuel Prices Will Rise by Up to 12 Cents Euros!

The 27 member countries of the European Union have finally reached an agreement on the reform of the carbon market. A new tax will be introduced in 2027.

It is now official. Starting in 2027, the European Union will tax carbon emissions from transportation and heating. A decision that may upset some actors in road transport, as well as individuals who will see their private transport expenses continue to rise.

Specifically, this reform, known as ETS2, will implement the following initiatives:

• Fossil fuel prices will increase by up to 10.5 cents per liter for gasoline and up to 12 cents per liter for diesel.
• The cost of heating fuels (gas, oil, coal) will also rise, although the exact amount is not yet known.
• Certain essential sectors are temporarily exempt from the additional carbon tax, such as agriculture and fishing, as well as diesel locomotives, which currently have no more eco-friendly alternatives in the short term.

To prevent a potential social crisis similar to the Yellow Vests movement, the European Union has considered several “mitigation” measures.

Increases, but also aid measures

The first involves a “social fund” for climate that aims to limit the impact of these price rises on households, especially the most modest, and on small and medium-sized enterprises by offering insulation vouchers or subsidizing greener transportation options. A total of 87 billion euros would be allocated, funded by revenues generated from the ETS2 reform.

Additionally, a ceiling price will be set at 45 € per ton of emitted carbon from transportation and heating, and this will be in effect at least until 2030.

Finally, a specific clause could postpone the reform until 2028 if energy prices remain very high due to major geopolitical crises, such as the war between Russia and Ukraine.

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