Price effects of incorporation of transportation into EU ETS

CO2 emissions from transport are steadily increasing, despite implementation of a number of CO2 mitigation policy measures. A potential new policy measure for CO2 mitigation in the transport sector is CO2 emission trading. In this report the consequences of including the European transport sector in the EU Emission Trading Scheme (ETS) were assessed. The report was commissioned by the VROM Council (VROM-Raad), also on behalf of the Dutch Energy Council (AER) and the Council for Transport and Public Works (Raad voor Verkeer en Waterstaat). First, the effect of integrating transport in the current EU ETS on the price of tradable EU allowances (EUa) was determined, for two different scenarios. Second, an indication was given of the effects of this CO2 price increase on competitiveness of the European industry and electricity sector. The results provide a first insight into the effects on EUa price that this policy option could have, and indicate that this might be a viable option for the future. However, as this was only a rough analysis, we also provide a number of recommendations for further research into this topic.