From 2027, more expensive fuel and gas: here’s how much the bill will increase each month

Thanks to new obligations and the expansion of the greenhouse gas emissions trading system under the EU ETS 2, it is likely that motor fuels will become more expensive starting in 2027, by about ten to several tens of cents per liter, and gas by up to 1.5 euros per kilowatt-hour (kWh). Estimates from official European sources are at the lower end, while those from the real sector are closer to the upper end. The new system will include so-called authorized holders of fuel excise warehouses, i.e., suppliers who will have to purchase so-called emission units for the sale of fuel for combustion in construction, road transport, and other previously unregulated sectors, which will create additional input costs for them.

New Obligors and Trading Method

Under the new EU ETS2 system, 100 percent of emission units will need to be purchased on the exchange, meaning there will be no partial free allocation of emission units as in the ETS1 system. From January 1, 2028, ETS2 regulated entities must submit a report to the competent authority on the average share of costs related to the transfer of emission units that have been passed on to end consumers. The EU Commission will adopt implementing acts related to the requirements of these reports. Trading in emission units will begin on January 1, 2027 (with a possible postponement until January 1, 2028, in the case of exceptionally high energy prices). INA will be obliged to purchase emission units in an amount corresponding to the emissions from fuel released for consumption in the previous year and submit them to an account opened in the EU Registry by May 30, 2028 – INA stated in a response to Lider.

These obligations stem from a series of European directives that were incorporated into domestic legislation by the Climate Change and Ozone Layer Protection Act in April of this year, and a proposal for a Regulation on the method of trading greenhouse gas emission units, which elaborates on these obligations, is currently in public consultation. The biggest novelty of the new EU ETS2 system is the expansion of the scope of emissions trading and the introduction of the obligation to purchase emission units. In addition to the existing obligors – power plants, refineries, and industrial facilities – the new EU ETS2 includes the construction sector, road transport, and the combustion of fuel in various sectors outside traditional industry. Moreover, new obligors will have to purchase these units entirely on the market, unlike those in the EU ETS1 system, which were annually allocated a number of units equivalent to what they consumed in the previous year.

ETS1 is, for example, production. The purpose of allocating free emission unit quotas was to prevent the relocation of production, known as ‘carbon leakage’, or the movement of production facilities to countries that do not have such obligations. In ETS2, there will be no free allocation; instead, 100 percent of emission units will have to be purchased on the exchange. An authorized holder of an excise warehouse will have to indicate the amount of fuel they will put on the market, calculate the greenhouse gas emissions for that fuel, and purchase units – our sources from the energy sector explained.

Judging by the list of obligors entering the new EU ETS2 category, gas and fuel suppliers are currently the most affected, and through them, obligations arising in other sectors outside traditional industry will largely be met. This circumvents the problem of charging end users who consume energy generated from these fuels, such as car drivers or apartment users. However, it seems likely that price increases could occur starting in 2027.

Estimates of Fuel and Gas Price Increases

Two years ago, when the system was being established, European legislators indicated that the price increase would be around 10 cents per liter, but estimates from ADAC suggested that fuel could be more expensive by nearly 40 cents per liter, while the Center for European Economic Research (ZEW) estimates that this could rise to 60 cents more per liter of gasoline in the long term. Namely, the EU ETS2 is set on market principles and without free quotas, so there is a risk that demand for emission units could increase, which would consequently create new pressure on fuel and gas prices. Whether this will indeed be the case is still uncertain, as it is unknown whether any measures will be introduced at the national or European level to mitigate the transfer of new costs to end consumers.

Additionally, there is the question of how to avoid double counting. INA, for example, produces fuel and is already part of the EU ETS1 system, and now its excise warehouses through which it sells its and accumulated fuel will be in the EU ETS2 system.

INA’s Obligations and Adaptation to the System

INA has three facilities that are covered by the existing EU ETS1 system: the Rijeka Oil Refinery, the Fractionation Facilities in Ivanić Grad, and the Gas Processing Facilities in Molve. The quantities placed on the market by producers and distributors will be monitored through MI-EN (Monthly Report on Stock Status, received, entered, produced, dispatched, and imported quantities, and calculated excise duty on energy products) and MI-PL (Monthly Excise Duty Report on Natural Gas and Other Gases) forms, which are submitted monthly to the Customs Administration for the purpose of paying excise duty on these fuels. To avoid double counting of emissions between ETS1 and ETS2 entities, INA will enter into an addendum to the contract with ETS1 buyers, obliging ETS1 entities to provide INA with verified data each year on the type, quantity, and purpose of the fuel they purchased from INA and consumed for ETS1 purposes in the previous calendar year – INA stated for Lider.

How much exactly fuel and gas will increase in price will be known soon enough, in just over a year. For illustration, an increase of 10 cents per liter would raise the cost of an average 50-liter fuel tank by 5 euros, while 1.5 euros per kilowatt-hour of gas would increase the monthly gas bill for the average Croatian household by about ten euros.