Road Transport and Its Potential Inclusion in the EU ETS

Road transport accounts for about one fifth of the EU’s CO2 emissions and its share is growing. One of the key policy tools for achieving CO2 emissions reductions in road transport is the implementation of emission performance standards for passenger cars and light commercial vehicles (LCV). However, regulation through emission standards has a number of drawbacks. In this article, we focus on an alternative or complementary policy option for the CO2 regulation of passenger cars and LCV in the EU, namely the inclusion of road transport in the EU Emissions Trading System (ETS). We discuss whether to incorporate the road sector directly into the existing EU ETS or to create a gateway solution. We present advantages and disadvantages of making fuel providers, car manufacturers, or consumers the regulated entity. We also look at how the emission allowances should be allocated and how the cap should be set.