Italy proposes suspending EU carbon market to lower energy prices

The Italian government, led by Prime Minister Giorgia Meloni, has submitted a radical proposal for a temporary suspension of the EU Emissions Trading System ETS. The initiative aims to directly lower energy prices for businesses and consumers, which – according to the Italian government – are artificially inflated by the high price of CO₂ emission allowances. The Italian argument focuses on protecting the competitiveness of domestic industry and fighting inflation, one of the drivers of which is energy costs. This proposal is to be discussed at the upcoming summit of European Union leaders. The proposal has met with immediate and firm opposition from the European Commission and a number of member states, particularly those with ambitious climate policies. Critics point out that suspending the ETS would be tantamount to abandoning a fundamental pillar of the EU's climate strategy, namely the "polluter pays" principle. As the French newspaper "Le Monde" notes, any attempt to lower the price of carbon would be interpreted as a downward revision of European climate ambitions and a undermining of the credibility of the entire Green Deal project. Revenues from ETS allowance auctions are a key source of funding for the green transition. The EU Emissions Trading System (ETS) has been in operation since 2005 and is the world's first and largest carbon emissions market. It covers the power sector, energy-intensive industry and intra-EU aviation. Its mechanism is based on an annual reduction of the overall emissions cap, which in theory encourages investment in low-emission technologies. The price of allowances, initially low, has risen sharply in recent years, exceeding even 100 euros per tonne of CO₂, which has become the subject of intense political disputes. In the debate on protecting European industry from competition from countries with less stringent environmental standards, the CBAM (Carbon Border Adjustment Mechanism) appears. It aims to impose a fee on imports of products such as steel, cement or fertilisers, corresponding to the CO₂ emission costs they would incur if produced in the EU. However, as an analysis by "Le Monde" points out, this mechanism has obvious limitations. Its implementation is administratively complex, and exporters may try to circumvent it, for example by moving only the most emission-intensive production stages outside the Union. Furthermore, CBAM does not solve the problem of high energy costs within the community, which directly hit consumers and businesses. „Cap and Trade Works in Europe. Don't Screw It Up.” — Bloomberg Business Despite the controversy over prices, the ETS system itself is widely recognised as a relatively effective tool for reducing emissions. As Bloomberg Business emphasises, the European "cap and trade" works, contributing to a real decline in emissions in the sectors it covers. Its strength is market flexibility, which allows for reductions where they are cheapest. The current debate is therefore not about the validity of the system itself, but about the political reaction to its economic consequences. High allowance prices, which are a signal of scarcity and an incentive for transformation, are simultaneously seen by some politicians as a threat to economic stability and social acceptance of climate policy. The dispute between Italy and the EU institutions reflects a broader tension between short-term economic imperatives and long-term environmental goals.