The Road to a Just and Effective ETS2  

The implementation deadline has been subject to debate over the last year. When the EU first introduced the ETS2 framework, the period from 2024 to 2026 was intended as a preparatory phase, during which all members would have to start gathering emissions data. Full implementation was scheduled for January 2027. However, a clause enabled postponement to 2028 in the case of energy prices remaining high. In March 2026, the EU Council and the European Parliament decided to postpone the implementation by one year, bringing the current implementation goal to January 2028. Critics claim that the ETS2 has been weakened too much ahead of its implementation, thus undermining its potential. 

Milena Damianova, Policy Coordinator for the Social Climate Fund and ETS2 Implementation at DG CLIMA in the European Commission, highlighted the positive collaboration of the Member States. They have so far worked closely with the Commission on the implementation process. Many Member States have been issuing permits, monitoring their plans, and reporting 2024 and 2025 emissions data, she pointed out. Meanwhile, the implementation framework is further strengthened. In June, for instance, the Commission amended the regulation on the auctioning of carbon permits which will allow for early ETS2 auctions from January 2027. According to Damianova, this shows that implementation is already underway. 

Successful implementation also hinges on the use of the Social Climate Fund (SCF). Without affordable alternatives, low-income households would be left disproportionately affected by larger bills for heating and transport.  
As of 16 September 2026, some Member States have started to implement the SCF. The Commission endorsed five National Social Climate Plans (NSCPs) and five more plans are officially submitted and in the pipeline for adoption.  
The ETS2 frontloading mechanism of the European Investment Bank would allow Member States to access a total of three billion Euros to support low- and middle-income households, even before any ETS2 revenues are made. The mechanism can encourage investment in cleaner heating and cooling systems and reduce overall energy demand ahead of the ETS2 implementation. 

Jonas Sonnenschein, Deputy Director at Umanotera and part of EUKI project ClimateFair Monitor, demonstrated that the implementation is lagging behind more than expected. NSCPs are far behind the intended implementation progress. Aggravated by the Iran war and the fossil fuel crisis, projections by the European Central Bank propose that petrol and gas prices will remain high throughout winter and likely only drop by the end of 2027.  

According to Sonnenschein, the effect of ETS2 must be considered from two perspectives: its impact on equality and on competitiveness. Concerns about the EU’s competitiveness are omnipresent. Some businesses may suffer in the short term due to the implementation of ETS2, while others will benefit, e.g. companies in the electric vehicle or heat pump value chain. Sonnenschein showed that if EU climate policy, like the ETS2, is implemented, Europe will be more competitive in the long term. The ETS2 will reduce the dependence on volatile fossil fuel imports. For European regions, that still highly depend on oil and gas, ETS2 could be the driver of resilience against future fossil fuel crises. 

One of his biggest concerns regarding ETS2 is the impact on inequality and the critique that it is a regressive instrument with respect to income distribution. Lower income households spend higher shares of their income on fossil fuels than those with proportionally higher incomes. At the same time, fuel tax cuts benefit wealthy households more, as they spend eight times more on fuel than low-income households. Strong carbon inequalities exist and are increased by carbon pricing. Instruments such as the SCF and front-loading facility intend to offset these dynamics, Sonnenschein explained. The Member States do not yet make sufficient use of them.  

The fossil fuel crisis risks undermining the effectiveness and implementation of the ETS2. Sonnenschein therefore stressed the need for structural and targeted policies. Blanket measures often have unintended effects.  

What Can Europe Learn from the Energy Price Crisis? 

Katalin Tarr, Policy Officer at Clean Air Action Group and part of the ClimateFair Monitor project, shed more light on the complexity surrounding the 2026 fuel price shock. As energy prices soared, governments took measures to lower fuel prices. That arguably highlighted the vulnerabilities of the system. She pointed out that energy prices had been a key issue in several other countries’ election campaigns.  
 
To illustrate her point, Tarr presented a campagin from March 2026, commissioned by the Hungarian government, which promoted ‘protected petrol and gas prices‘ ahead of the Hungarian national election in April 2026. She argues that much of the public’s disagreement with ETS2 measures stems from a distorted public view of the issue. To successfully implement the ETS2, she stresses that measures must be taken to raise awareness of its benefits. Carbon pricing has the potential to reduce inequalities and benefit the economy. It is also crucial to reduce any potential social inequalities from the implementation through direct payments and to make these tools more accessible to member states.  

Moderator Luke Haywood, Head of Climate and Energy at the European Environmental Bureau, stressed the importance of clear guidance on carbon-tax pricing. Transparent communication, targeted social support and effective use of data will therefore be crucial to ensure that the ETS2 can reduce fossil-fuel dependency in a just way.  
 
In the current domestic and geopolitical situation, reducing the dependency on fossil fuels will benefit Europe significantly, participants and speakers agreed. The goal of achieving an effective ETS2 remains relevant, yet it is also beneficial to reap socio-economic side effects. As in the case of Bulgaria, where data collected ahead of ETS2 and SCF helps to study and understand the impact of transport poverty on society.  

The success of ETS2 will depend on putting a carbon price in place and on ensuring that the transition is socially fair, economically viable and clearly understood by those it affects.