Fuel companies might in future have to contribute a penalty for each litre they sell to motorists, says environmental group T&E.
For a fair and just environmental transition, the EU should pass on part of the carbon price for cars and homes to fuel suppliers rather than European households.
The EU can legally require fuel suppliers to absorb part of the EU’s forthcoming carbon levy for buildings and road transport instead of passing the burden entirely onto consumers, a legal analysis commissioned by Transport & Environment (T&E) finds. If the climate transition has any hope of working, the EU should ensure that big polluters – not the small households – pay the bulk of the costs, says T&E.
As part of its Fit for 55 proposals, the European Commission has proposed including the road transport and buildings sectors into the bloc’s carbon market from 2026, known as the Emissions Trading System “ETS2”. Fuel suppliers like Total and Shell would need to buy pollution permits for each litre of fuel they put on the market. As the market is currently designed, they could then pass this cost on entirely to end-consumers. This could disproportionately impact poorer citizens driving their cars or heating their homes.
Carbon pricing for road transport and buildings is necessary to ensure the EU meets its 2030 climate targets, as it will reduce the demand for fossil fuels and private cars. But the burden shouldn’t only fall upon the consumer.
Sofie Defour, climate manager at T&E, said, “Ordinary people are not causing the largest chunk of emissions, yet they are being asked to pay. Oil majors make billions in profit each year. They cause environmental disasters of immeasurable scale whilst paying almost no taxes. It is high time for oil majors to pay their fair share and absorb part of the EU’s carbon price.”
The legal analysis commissioned by T&E considers whether fuel suppliers can indeed be required to absorb part of the ETS2 cost, rather than passing it on entirely to EU citizens. The analysis finds several promising pathways, including one that would limit the amount that fuel suppliers can pass on to consumers.
Anything above that limit would be covered by the suppliers, in the form of a penalty paid to the Social Climate Fund, designed to support vulnerable households who might not otherwise be able to move their transport and heating consumption away from fossil fuels.