Delivering the ETS2: Do or die time for the European Green Deal?

Frontloading future carbon revenues to bring certainty and overcome insufficience

The implementation of ETS2, postponed to 2028, faces heightened uncertainty due to unresolved legal issues and inflation concerns impacting consumer bills (heating, fuel prices). Despite this, ETS2 remains essential for meeting climate targets by 2030 and beyond, covering transport, buildings, and small industry.

 Based on extensive stakeholder interviews and literature review, two key concerns arise: the need for price stability guarantees during market fluctuations and perceived insufficiency in the Social Climate Fund and resources before ETS2’s start, along with consideration of national specificities.

 To address these, we recommend creating a “frontloading” mechanism via the European Investment Bank, borrowing against future ETS1 (following the Japanese example) and ETS2 revenues to raise €200 billion between 2028 and 2034. This politically inevitable step requires reopening the ETS directive and unanimous Member State approval, with built-in price floors and ceilings to ensure loan repayment and price containment. Early financing will boost decarbonization investments, foster clean technologies, and drive emissions reductions while exerting downward pressure on ETS2 market prices.