EU faces “difficult second album” syndrome with ETS2

By seeking to extend the “polluter pays” principle to building owners and road users, the ‘sequel’ to the EU’s Emissions Trading Scheme was always likely to run into public and political opposition. The risk for the EU is that any concessions to make ETS2 more palatable could dilute its effectiveness in cutting emissions. In any case, given that ETS2 will probably have just a small and temporary impact on euro-zone inflation when it is introduced in 2027, it will at least not cause sleepless nights at the ECB.