The EU Emissions Trading System II – the EU’s new carbon market designed to cut emissions across road transport, buildings and small industries – is set to launch in 2027.

BloombergNEF’s (BNEF’s) EU ETS II Market Outlook forecasts that carbon prices could surge to €149 per metric ton ($156/t) by 2030 as a result, leading to significant emissions abatement.

While the cost increases will fall on fuel suppliers, these will ultimately filter down to end-users, with consumers likely bearing the brunt of the carbon price. BloombergNEF predicts road transport bills could increase 22-27%, while home heating expenses could rise as much as 31-41% if costs are fully passed through. This price increase has resulted in resistance to the system from EU members including Poland, the Czech Republic and Slovakia.

Despite the pushback, the potential benefits could be vast. BloombergNEF predicts that the EU ETS II will generate approximately €705 billion in revenue from 2027 to 2035. Additionally, the projected surge in carbon prices (Figure 1), driven by a potential deficit of emission permits, will result in a reduction of an extra 232 million metric tons of CO2 equivalent (MtCO2e) of direct emissions between 2027 and 2030.

The new carbon market sets a lower emission reduction target of 43% by 2030 from 2005 levels, compared to 62% in the existing system. The market’s expansion will see 78% of total greenhouse gas emissions from the European Economic Area (EEA) covered by a carbon price from 2027.

Emma Coker, head of European environmental markets at BloombergNEF and co-author of the report, said, “Achieving the EU’s lofty climate ambitions is going to require commitment across all sectors. Tackling the road transport and building sectors that contribute significantly to overall emissions will be tricky in practice, especially when crackdowns on these sectors directly affect consumers.

“Our forecasts reveal a sharp increase in carbon prices starting from 2027, which will directly impact consumer bills. Yet, the short term pain will ease as early emission reductions and further price declines in low-carbon solutions such as EVs and heat pumps will see prices drop after 2030.”