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EU delays carbon tax on buildings and transport to 2028 under new climate deal

The European Union has pushed back the launch of its carbon tax on buildings and road transport by one year, delaying the entry into force of the scheme until 2028. The move comes as part of a broader climate package that locks in a 90% emissions cut by 2040, but exposes deep political unease over the social cost of the green transition.

The revised system – known as ETS2 – will eventually require fuel suppliers to monitor and pay for the emissions generated by heating and transport fuels. Although suppliers, not households, will be directly taxed, the cost is widely expected to trickle down to consumers through higher energy bills.

Researchers at Delft University estimate the measure could push tens of thousands more households into energy poverty by 2030 unless governments act to cushion the impact.

‘Gradual and fair' transition, EU says

Climate Commissioner Wopke Hoekstra defended the delay, arguing that the shift must be phased in "gradually and smoothly" to avoid disproportionate pain for low-income communities.

Hoekstra said the Commission is exploring ways for governments to frontload revenues from ETS2 — potentially with support from the European Investment Bank — so poorer households can receive help early to renovate homes, improve heating systems or shift to cleaner transport.

Revenue from ETS2 will flow into the Social Climate Fund, designed to help vulnerable households, small businesses and regions adapt to rising carbon prices.

Once in full operation, ETS2 will expand the EU's carbon market to cover roughly 75% of total emissions, building on the existing ETS, which already includes power generation, heavy industry, aviation and, since 2024, the maritime sector.

Green groups say delay weakens momentum

Environmental organisations criticised the postponement.
Sven Harmeling of Climate Action Network Europe called it "a missed opportunity", arguing that earlier carbon pricing could have pushed member states to expand public transport, accelerate home renovations and invest more rapidly in renewables.

Industry carbon credits remain highly contested

Lawmakers also agreed to allow industries to use up to 5% international carbon credits to meet their 2040 reduction obligations — an increase from the European Commission's original 3% proposal. A further 5% could be added later under a revision clause if the bloc veers off track.

Ambitious countries such as Germany, the Netherlands and Sweden strongly opposed raising the threshold, while France and Italy supported a higher limit and Poland demanded as much as 10%.

To satisfy the Council, negotiators kept 2036 as the official start date for using credits, with a 2031–2035 pilot phase under discussion.

One EU diplomat warned the trial must be "scientifically backed", noting that carbon credits remain controversial for their limited environmental integrity.