Gasoline Prices to Surge by 40 Cents Due to European Tax: When Will the Blow Hit?
The Impact of Emission Trading Scheme on Fuel Prices in the EU
The price of gasoline and diesel in Italy and the rest of the European Union could increase significantly, but this time the blame would not be on market turbulence or chaos in the Strait of Hormuz, but on a tax decided by Brussels.
There seems to be no relief for gasoline prices, which have been stable above €1.8 per liter at self-service stations in Italy for some time, while diesel is above €1.7 per liter.
The government has suggested that it does not have the funds to intervene even if the threshold of €2 per liter is exceeded.
In this already complex situation, things are about to get more complicated with the new Emission Trading Scheme (ETS) – a system for trading greenhouse gas emissions allowances aimed at reducing the environmental impact of certain high carbon footprint sectors.
Expansion of Emission Trading Scheme
Initially affecting energy producers from fossil fuels, heavy industries (steel, iron, aluminum, cement, paper, and glass), and the civil aviation sector, the new ETS implemented by the European Union in 2023 will also extend to companies in the transport sector and buildings.
The expected result is a marked increase in the cost of gasoline and diesel once this tax comes into effect in 2027.
Recent alarms have been raised by analysts regarding a certain increase in gasoline and diesel prices in the European Union due to the enforcement of the new ETS.
Starting in 2027, the EU will quantify CO2 emissions from buildings and road transport, with a new carbon pricing system known as Emissions Trading System 2 (ETS2).
Initially, when this new tax was introduced in Brussels in 2023, it was believed that prices would remain below €45 per ton of CO2.
However, the current studies suggest that prices could rise up to €200 per ton, leading to an increase in fuel prices that is four times higher than the initial estimates.
Thus, the increase in gasoline prices could be up to forty cents per liter, a significant burden for consumers.
In response to these concerns, the European Commission has allocated an €87 billion climate social fund alongside the new ETS, although these funds may prove insufficient if the most pessimistic predictions come true.
