Europe | Energy crisis and carbon pricing

Summary

The world is now facing the biggest energy crisis of the last 40 years, making it hard to make any meaningful progress on climate legislation in the European Union (EU).

Key points

• Key points:
• The European Parliament has found it tough hammering out an agreement on an emissions trading system with more ambitious targets for both energy and industry, extending it to the residential and transport sector and implementing a carbon tariff on certain imported products.
• These improvements include moratoria, compensation for the exporting industry, or the creation of a social climate fund.
• The transition to decarbonization is impossible if it is not also economically profitable. With this in mind, the development of voluntary carbon markets is a good example of how we can move forward, provided the right incentives are designed.
• The best way forward is to develop non-protectionist extraterritorial measures that internalize the cost of imported carbon emissions, thus making the widespread deployment of pricing mechanisms in exporting countries cost-effective.

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