Solar Heat Europe actively monitors the postponement and proposed amendments to ETS2
The European Commission has proposed amendments to adapt the Market Stability Reserve (MSR) for ETS2 (covering buildings, road transport, and additional sectors). This aims to address price volatility and liquidity risks as ETS2 prepares for launch in 2028 (postponed from 2027).
While ETS1 covered the power and industry sectors, ETS2 covers buildings and road transport. These sectors involve fuel suppliers passing costs to households and businesses, making affordability and predictability critical. The Commission aims to ensure that ETS2 delivers credible carbon pricing while avoiding social backlash and excessive price spikes that could undermine public acceptance. Strengthening the Market Stability Reserve (MSR), introducing early auctions and frontloading mechanisms are intended to smoothen the transition, and support vulnerable consumers.
The key proposed changes by the European Commission are:
· Enhanced Price Control: MSR injects up to 80 million allowances annually if prices exceed €45/tCO₂.
· Extended Reserve Capacity: Up to 600 million free allowances remain valid beyond 2030 (“sunset clause” removal).
· Earlier Auctions & Buffer: Auctions start mid-2026; buffer ensures smoother intervention.
· Frontloading Facility: EIB to pre-finance clean heating and transport investments.
The EC proposal will now move through the ordinary legislative procedure, requiring agreement between the European Parliament and the Council.
For the solar thermal sector, ETS2 offers opportunities through funding streams like the Social Climate Fund and frontloading facility, which can accelerate solar thermal deployment. The main initial objectives of ETS2 are to:
· Cut fossil fuel use in buildings, lowering compliance costs.
· Provide additional revenues through the Social Climate Fund and frontloading facility.
· Support Member States’ complementary measures toward 2030 targets.
Considering recent developments, the positive impact on the sector would be:
· ETS2 revenues and the Social Climate Fund could finance solar thermal deployment, especially for vulnerable households and district heating projects.
· Early auctions and frontloading mechanisms may unlock investment streams for clean heating solutions before ETS2 compliance starts.
And the potential negative impacts of recent developments:
· The end of the sunset clause (2030), which would mean more free allowances available in the future, hence lower fossil fuel prices.
· If MSR interventions lead to lower carbon prices, fossil fuels may remain relatively competitive, slowing the shift to renewables.
· Delays in ETS2 implementation or weak complementary policies could reduce urgency for solar thermal adoption. Such delays might lead to uncertainty and impact investors’ (and customers) confidence.
Solar Heat Europe will pursue its Advocacy effrots, together with other relevant trade associations in the renewable energy sector, to ensure an efficient implementation of the ETS2 measures. This topic will be followed in all SHE WG (National Associations, Buildings and Large Scale WG).
Contact esteban.gas@solarheateurope.eu