Blog: European CO2 tax is coming

Blog: European CO2 tax is coming

Sometimes it seems so attractive; ordering cheap products from outside the EU. But due to the higher CO₂ emissions that these products entail, we affect the climate disproportionately. That is why the EU is going to introduce a CO₂ tax. This is a noble goal, because nowadays we’ve exported much of our CO₂ emissions to, for example, China. Production with a higher CO₂ emission takes place there, and afterwards the products are imported back into the EU again.

In the EU we’ve got the EU Trading System (ETS). The operation of the system is illustrated in the figure below. If a participating company has too few emission rights, the company can purchase the emission rights at an auction. If a company has too much, it can sell it back to the auction.  Thus, the amount of CO2 emissions of the participating companies is fixed.



Figure: The trade takes place by transaction of emission rights

Working towards 0% emission in 2057

The ETS means that the total emissions for the larger CO₂ emitting companies are limited. In the Netherlands there are 419 installations that will emit a total of approximately 85 Mtonnes of CO₂ in 2019. This is almost half of the total CO₂ emissions in the Netherlands. Each year, the set ceiling decreases slightly. From the start in 2005, the ceiling has been reduced by 20% and the goal is to work towards zero emissions by the year 2057.

To prevent us from circumventing the system by buying outside the EU, the CO₂ tax will now be introduced . The current proposal is to start with the most CO₂-intensive products, namely cement, steel, aluminum, fertilizer and electricity. In order not to allow the competitive advantage of the import tax to become too great, these industries within the EU will have to pay for the emission rights from now on. To my opinion that is a good choice, even if these sectors themselves are not happy with it.

CO₂ tax: consumer vs. business

All in all a good system. My personal opinion is that we should try to get more systems under the European Emissions Trading System (ETS). Now the price of a ton of CO₂ emissions is finally starting to rise to 50 euros per ton in May. Converted, this is 9 euro cents per m3 natural gas. Compared to the 35 euro cents in energy tax that consumers pay per m3 of natural gas, this is still low, but it starts to come up. That is a good thing, because the costs for reducing CO₂ emissions are very one-sidedly placed on the consumer. This is unfortunate, because by implementing the most cost-effective CO₂ reduction measures, more emissions can ultimately be saved.

This is also what we see in our energy practice every day. Measures to save CO₂ emissions at larger companies are often not feasible, while more expensive measures that save less CO₂ for consumers and smaller companies are feasible due to the high natural gas price. This imbalance leads to less emission reduction than is desired.

Read more on emission reduction in our blog: Europe, climate neutral?

About this article

19 July 2021 / Author: Dr. Ir. René Cornelissen

All news items

Subscribe to our newsletter

Our international newsletter is send out twice a year

International newsletter