In Q4 2024, the weather was quite favorable for owners of houses and apartments. However, more and more people think about heating costs in the long term. This is the right approach because, among other things, we are about to launch a new EU system for trading emissions from buildings and transport. New ETS2 system will start operating in 2027 or 2028, and its impact on home heating costs will be felt – despite initial EU actions aimed at stabilizing emission allowance prices. Recently, experts from two different companies warned against a rapid increase in the prices of the above-mentioned allowances by 2030 – 2031, which is why experts from the RynekPierwotny.pl portal decided to take a look at these forecasts, although they are burdened with quite high uncertainty.
Experts from Norway predict a negative scenario
You might get the impression that it’s future prices of emission allowances from the ETS2 building and transport system is a topic that currently attracts too little interest in Poland. All the more so because our country will be one of the countries most exposed to the painful effects of the above-mentioned system on household wallets (including due to the still important role of coal as a heating fuel). Interestingly, a recent warning signal regarding the prices of allowances in the ETS2 system comes from Norway, a leading country in terms of producing “clean energy” for its own needs.
In October 2024, experts from the Norwegian company Veyt reported that, in their opinion, the prices of emission allowances in the ETS2 system at the beginning of the next decade may be as high as EUR 220 per tonne of CO2. At the beginning of the operation of the described system (2027-2028), this rate should be around EUR 50/tonne. However, Veyt analysts forecast rapid increases in rates paid for ETS2 allowances. The Norwegian company’s forecasts contrast strongly with the European Commission’s projections, which assume an increase in the rate for ETS2 emission allowances to approximately EUR 70 per tonne in 2030 (provided that the assumed decarbonization rate is achieved).
Much will depend on EU member states
Veyt experts pointed out that the activities carried out by Member States of the European Union indeed, they can significantly reduce future pressure on ETS2 emission allowance prices. This is, of course, about the broadly understood decarbonization of construction and transport. However, the question arises whether EU countries will achieve the assumed goals. It is worth remembering that there are currently visible problems with maintaining the emission reduction rate that will enable the achievement of the target set for 2030 (see: T&E report from June 2024 titled “National climate targets off track: Six years left to course correct and avoid penalties“).
Another cautionary forecast has emerged recently
The November analysis by the consulting company ClearBlue Markets seems slightly more optimistic for Poland and many other EU countries (although still disturbing). It assumes an increase in the prices of emission allowances from the ETS2 system of 90% within the first three years. According to ClearBlue Markets analysts, in 2030 allowances for building and transport emissions may cost EUR 105 per tonne of CO2which is approximately EUR 50 more than at the beginning of the ETS2 system. Experts also emphasize that decarbonization in line with EU plans would mean maintaining the price of allowances ETS2 at around EUR 70/tonne by the end of the decade.
PLN 1,000 more per tonne of coal – this is a possible scenario
For the average reader from Poland, a more important issue than the forecasts described above is the answer to a rather prosaic question. The point is how much the price of allowances ETS2 will affect heating and transport costs. Clarifications on this matter were recently provided by the Ministry of Climate and Environment (MKiŚ). It’s about response of August 20, 2024 to the interpellation of MP Wojciech Szarama (DPN-WZE.050.4.2024.JM). The Ministry of Environmental Protection, citing calculations of the National Center for Emission Balancing and Management, stated that with a low price of emission allowances of EUR 45/tonne of CO2the cost impact of ETS2 will be as follows:
- hard coal prices – increase by approximately PLN 450/ton
- gasoline and crude oil prices – increase by about 50 groszy/litre
- natural gas prices – increase by approximately 40 gr/m3
- LPG prices – increase by about 30 groszy/litre
After assuming higher expected prices of emission allowances than the base level of EUR 45 per tonne of CO2the estimated results will of course be correspondingly larger. For example, the ClearBlue Markets forecast for 2030 discussed above (EUR 105/tonne of CO2) means a positive price effect for a ton of hard coal of approximately PLN 1,050. The negative effects of fuel price increases on poorer households are to be partially compensated by the Social Climate Fund.
Author: Andrzej Prajsnar, expert of the RynekPierwotny.pl portal
