"Discussions at the level of other EU member states on the system's shortcomings have progressed, and today 15 European countries, including Estonia, submitted a joint appeal to the European Commission. It calls for a critical and substantive reassessment of the CO2 taxation system," Laura Remmelgas, head of the Climate Department at the Ministry of Climate, told ERR on Wednesday.

Remmelgas added that the appeal clearly shows that the concerns raised about the design of ETS2 and that the social impacts of its mechanisms are not just in the interest of a few member states, but in the common interest of the majority.

In addition to Estonia, the letter was also signed by Austria, Belgium, Bulgaria, Croatia, the Czech Republic and Germany, Italy, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Spain.

The EU's a second emissions trading scheme (ETS2) is currently scheduled to be launched in 2027. The scheme will apply to road transport and the heating of buildings, meaning fuel retailers and smaller heat producers will have to pay according to the amount of carbon dioxide their fuel produces. This cost will in turn be passed on to consumers, meaning the price of both fossil fuel-produced and raw heat will rise further. As most of the major district heating companies have already signed up to ETS1, the increase in heating costs will mainly affect people with individual gas boilers or smaller natural gas boilers.

Remmelgas explained that the appeal focuses on concerns about the price of a carbon unit and therefore urges the European Commission to find suitable solutions.

"Firstly, there is the uncertainty about the carbon price, which makes it difficult for countries and consumers to prepare when it is not clear what the unit price will be. It also points out that market-based pricing is unpredictable, which leads to volatility in the unit price," said Remmelgas. "It also highlights that the existing safeguarding mechanisms, which have been designed to control unit price fluctuations, are not sufficient."

To address those concerns, the EU member states have put forward five proposals that the believe will help mitigate the situation and better prepare for change. These include the suggestion that the Commission begins regularly publishing statistics on ETS2 areas to help market participants shape their price expectations; the launch of earlier unit price auctions in order to reduce price uncertainty; the modification of the market stability mechanism to better mitigate large price spikes; the extension of the market stability mechanism beyond 2031 as currently proposed; and the strengthening of price governance mechanisms.

With more countries than required for a qualified majority having signed up to the letter, and with the potential for others to join, the European Commission will now have to come back with a legislative proposal to change the second trading system, Remmelgas said

"What is important is that the European Commission gets the message that there are these problem areas in the system and that the system needs to be revised," she stressed.

"The reason why the entire logic behind the pricing in this system needs to be analyzed very thoroughly is that the impact of the price is passed on to the end consumer. It is therefore important that the unit price is predictable, that it does not fluctuate, and that countries have time to make the necessary preparations to mitigate that impact. We can see that the current timeframe for implementation does not allow for this and therefore the most sensible thing from Estonia's point of view would be to abolish the system. However, if there is no support for that, so to speak, then [we ought to] postpone it," Remmelgas said.

According to Remmelgas, a number of countries, including Estonia, have stressed that this is only the first important step and the solutions proposed in the letter are not the only ones possible.

"Despite joining this letter, we will certainly continue to work actively in this direction, both inside the European Commission and with other member states, in order to find supporters at least for postponing this system. As far as we know, there are also countries that are ready to move forward with requesting a postponement," she said.

"It is important to stress that while Estonia supports the common approach of the countries, we continue to consider it important to request the postponement or complete abolition of the system, and we will certainly go ahead with that. However, we do consider this appeal as an indispensable first step in drawing the European Commission's attention to the serious shortcomings of ETS2," Remmelgas explained.

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