Carbon tax on buildings and transport delayed to 2028 under EU climate deal

European lawmakers agreed on Tuesday to delay the application of the bloc's carbon tax on buildings and road transport until 2028, one year later than the European Commission initially proposed.

Households and businesses using fossil fuels for heating and transport will likely see higher bills once the new version of the European Union's emissions trading system (ETS), or carbon market, comes into full effect.

Under the new arrangement, fuel suppliers, rather than end consumers such as households or car users, will be asked to monitor and report their emissions.

The Commission argues that the prices set by the carbon market will encourage investments in building renovations and low-emissions mobility, but critics of the plan say it will ultimately drive suppliers to raise energy prices for consumers.

The impacts of the upcoming pricing of emissions from buildings and road transport have been analysed by researchers at the Dutch Delft University of Technology, who estimated that it could push tens of thousands more households into energy poverty by 2030.

EU Climate Action Commissioner Wopke Hoekstra said the new law should be introduced "gradually and smoothly" to avoid pressure on low-income households.

"We are also exploring the possibility for member states to frontload carbon revenues from buildings and road transport, in cooperation with the European Investment Bank, to support low- and middle-income households in reducing their heating or mobility bills early on," he added.

The Dutch Commissioner also said that the revenue generated through carbon pricing and channelled via the Social Climate Fund will help tackle energy and transport poverty and deploy clean technologies.

"The transition needs to be just and fair, whereby especially vulnerable households, small companies and regions that are most exposed to structural changes are protected and supported," added Hoekstra.

The ETS currently covers about 40% of EU emissions from energy and heat generation, and energy-intensive industries. Emissions from aviation and maritime transport were included in 2024.

A new iteration of the EU27’s carbon market, ETS2, was created following a 2023 revision of the original ETS to increase revenue from emissions from buildings and road transport.

Once fully enacted, the law is expected to cover roughly 75% of emissions across the EU.

The Commission said that the delay until 2028 will not affect the monitoring, reporting and verification requirements of ETS2, which have started as planned in 2025.

Sven Harmeling, head of climate at the green NGO Climate Action Network Europe, regretted the delay to the ETS2, saying it is a missed opportunity for member states to improve public transport, renovate homes and public buildings, and invest in renewables to reduce energy prices.

"Member states need to ensure a timely, fair and effective entry into force of ETS2 and secure the strong protection and enhancement of the role of the Social Climate Fund," said Harmeling.

Carbon credits

EU lawmakers have also agreed to keep polluting credits for industries to ease their path towards a 90% cut of greenhouse gas emissions by 2040.

The deal sets polluting credits – also known as international carbon credits – at up to 5% of the reduction target, up from the 3% proposed by the European Commission. However, up to an additional 5% could be considered under a revision clause if the bloc deviates from the 90% reduction target.

Carbon credits are tradeable certificates that industry can use to offset part of its emissions and create financial incentives to reduce pollution.

Finland, Germany, the Netherlands, Portugal, Slovenia, Spain, and Sweden were among the most ambitious countries seeking to maintain the 3% target on polluting credits, while France and Italy were pressing for 5% and Poland called for 10%.

EU ambassadors, on behalf of the Council, and lawmakers in the European Parliament agreed to keep the year 2036, proposed by the EU executive, as the start date for using polluting credits. However, a pilot period between 2031 and 2035 will be considered.

"The trial period is to show some parties that we are in favour of using these credits, but it can backfire. It needs to be scientifically backed," one EU diplomat told Euronews.