The European emissions trading system EU ETS2 planned from 2027 onwards is intended to help decarbonize the end-use sectors of buildings and transport. In this analysis, the Institute of Energy Economics at the University of Cologne (EWI) examines how the introduction of the EU ETS2 could affect the buildings and transport sectors by 2035. With the help of an energy system model and a specially developed market model, an equilibrium CO₂ price path and its effect on emissions, end customer prices and investment decisions are analyzed.
The key finding is that very high CO₂ prices may be required to achieve ambitious climate protection targets. Among other things, this is due to the long investment cycles of heating systems and the comparatively high costs of decarbonizing the sectors. At the same time, the study sheds light on potential distribution effects, as the revenue from the trading system is distributed among the member states and social cushioning measures such as the Climate and Social Fund (KSF) are to be used.
