[Insights] Emission Trading System 2: A New Carbon Price and a Higher Household Bill

From 1 January 2028, ETS2 puts a carbon price on the gas, heating oil, petrol and diesel we buy. Power plants, industry and aviation have paid under the original EU ETS for years. Airlines flying within Europe have bought every allowance since 2026. Now the price reaches our homes and our cars.

It comes on top of other deadlines. EU countries must plan to phase out fossil-fuel boilers by 2040, and new cars face a 90% CO₂ cut from 2035 under the Commission’s latest proposal. Everything points the same way: away from burning fuel at home and on the road. Some member states resist, and six asked in October to delay ETS2 to 2030. But 2028 is the law today.

At the Sustainable Building Design Lab (ULiège), we looked at exposure using our research on thousands of post-war detached homes and row houses in Belgium. National averages tell only part of the story. For a pre-war row house with only its roof insulated, we estimate about €215 a year in extra heating costs at €50/tCO₂. Fully renovated, about €40. Across 100,000 simulations varying the carbon price, building data, energy use and supplier pass-through, 90% of outcomes fell between €150 and €310. These are conditional estimates, not future bills.

What could push the carbon price up or down? Up: a cap that shrinks by about 5% a year, slow uptake of heat pumps and EVs, cold winters, and fewer spare allowances once the early auctions end. Down: extra allowances released when the price passes €45 (in 2020 euros), more allowances in the first years, high fuel prices that already cut demand, faster electrification, or a political delay.

The illustration shows a higher case: at €100/tCO₂, gas heating plus petrol driving adds about €47 a month before VAT. The finding that matters most is about people. Older owners may struggle to finance a renovation. Tenants pay the bills while landlords decide on insulation. Car-dependent households may have few alternatives. A price signal can encourage change. It cannot give every household the means to respond. Support should follow building condition, fuel dependence, and the capacity to invest.

Analysts project carbon prices of around €50/tCO₂ in 2028 and €90 by 2032. Should households plan for the starting price or the longer-term exposure?

Colleagues across Europe: which price assumptions are informing household advice and renovation policies in your country?

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