Czech Prime Minister Andrej Babiš has urged the European Union to reform carbon market rules by introducing a cap on carbon allowance prices and delaying the expansion of the EU Emissions Trading System (EU ETS), according to a report by Reuters.
In a letter sent to EU leaders ahead of a competitiveness-focused meeting, Babiš argued that elevated carbon prices are significantly increasing energy costs and weakening industrial competitiveness across Europe. He warned that sustained high emission allowance prices could accelerate the relocation of industrial production outside the EU.
Proposal includes postponing ETS 2 implementation
The Czech government has specifically called for the postponement of the second phase of the ETS expansion, commonly referred to as ETS 2, until at least 2030. ETS 2 is designed to extend carbon pricing to sectors such as buildings and transport and is currently scheduled to begin in 2028 following an earlier delay from 2027.
Babiš stated that limiting carbon price increases would help maintain industrial activity while preserving the overall direction of EU climate policy.
EU carbon market remains central to climate policy
Introduced in 2005, the EU ETS remains the bloc’s primary climate policy instrument. The system requires power producers and industrial companies to purchase emission permits for each metric ton of carbon dioxide emitted, creating a financial incentive to invest in cleaner technologies and low-emission production processes.
Revenue generated through permit auctions is partly redistributed to EU member states, while additional funds are directed toward climate and decarbonisation initiatives across the bloc. Carbon allowance prices were trading at approximately €81/mt on February 2, after reaching around €90/mt earlier in January.
Divisions emerge among EU member states over carbon pricing
Several EU countries, including Poland, have raised concerns that elevated carbon prices may partly reflect financial market speculation rather than underlying industrial demand. These countries argue that unchecked price increases could undermine economic stability and industrial competitiveness.
However, other member states continue to support maintaining a strong carbon price signal, stressing that robust pricing is essential to accelerate decarbonisation and ensure progress toward the EU’s long-term climate targets.