Italy Pushes to Suspend EU Carbon Market Ahead of Review
(Bloomberg) -- Italy’s industry minister called for a suspension of the European Union’s carbon market until it is reviewed and overhauled, adding to the growing pressure on the bloc’s primary tool for cutting CO2 emissions.
The Emissions Trading System, “as currently designed, represents an additional tax burden on European companies, affecting their costs and limiting their competitiveness,” Industry Minister Adolfo Urso said in Brussels. Italy will ask the European Commission, the bloc’s executive arm, to suspend the market pending a “thorough revision” due to be proposed later this year.
Benchmark carbon allowances fell as much as 4.6% to €69.25 per ton as of 11:31 a.m. CET on ICE Endex. Prices have slumped by around 20% so far this year amid pressure by EU member states to shield industry. A spokesperson for the commission said a review of the ETS was ongoing and that it wouldn’t comment on member states’ positions during the process.
Urso’s comments are the latest in a string of criticism of the EU’s carbon market, known as the ETS, in recent weeks. At an industry summit in Antwerp, German Chancellor Friedrich Merz said the continent should be open to revising or delaying the market if it wasn’t aiding companies in the switch to cleaner production. He later softened his tone to clarify he supported the program.
The EU’s carbon market is central to its ambitions of reaching net-zero emissions by mid-century. It sets a cap on emissions, reduced each year, with industry having to pay for each metric ton of CO2 they emit into the atmosphere.
The commission is set to revise emissions benchmarks — which determine the allocation of free emissions allowances for industry — next month. Italy is also seeking to postpone the phase out of those permits as part of a broader review slated for the third quarter.
Italy, one of the EU’s largest member states, is already preparing a sweeping overhaul of its electricity market that would strip carbon costs from power bills, a move that has driven a sharp selloff in forward prices.
Other member nations, including Slovakia and Poland, have also called for substantial changes to the ETS as Europe seeks to address signs of deindustrialization and compete with the US and China. Discussions are set to continue next month when leaders from the EU’s 27 member states meet in Brussels.
The ETS system has been one of the EU’s “most successful instruments” to help cut “emissions with increased economic growth,” Ebba Busch, Sweden’s energy minister, told reporters. “If we start eroding the very basis and foundation for the ETS, that will rather undermine the huge industrial transitions that we have seen over the last 10 to 20 years.”
European cement stocks fell following Urso’s comments, with investors concerned that delaying tighter emissions rules would reduce the advantage of companies that have already invested heavily in greener production.
Meanwhile, some chemicals stocks gained. While negative for cement makers, a potential softening of the regulations is seen positively for heavy-emitters in the chemicals industry.
(Updates with context and details throughout.)
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