Description
Pleas for abolishing fossil subsidies in a particular EU Member State, such as the Netherlands, often fail to recognize the impact of the European Union Emissions Trading System (EU ETS). Such an abolition would amount to an increase in national energy taxes compared to those of other countries. At the same time, many of the companies that receive fossil subsidies are or will be covered by the EU ETS. Under the EU ETS, industry and power generation have to be climate-neutral by 2040, because no new emission allowances will be issued as of 2039. Fossil subsidies do nothing to change that, while unilaterally abolishing them could harm the competitive position of companies in that particular EU Member State. Contrary to what some believe, the Market Stability Reserve (MSR) and the Carbon Border Adjustment Mechanism (CBAM) will not prevent that emission allowances remain unused after unilaterally abolishing fossil subsidies. When companies in one EU Member State are faced with higher energy taxes, they will lose market share to companies elsewhere in Europe that will produce more and thus need more emission allowances. This means that fewer or no allowances will remain unused, so that they will not be cancelled by the MSR. Moreover, CBAM only considers the difference between the EU allowance price and the carbon price of certain non-EU products imported into the EU. The level of energy taxes in an individual Member State plays no role in this.| Period | 26-Mar-2025 |
|---|---|
| Event title | 2025 Energy and Climate Economics and Business Days |
| Event type | Conference |
| Location | Groningen, NetherlandsShow on map |
| Degree of Recognition | International |
Keywords
- fossil subsidies
- emissions trading
- EU ETS
- competitive position
- carbon leakage