ETS2 extends EU carbon pricing to heating fuels from 1 January 2028 — one year later than originally planned, after the postponement was formally adopted in March 2026. Every €50 per tonne of CO2 adds roughly 1 cent per kWh to natural gas, about 10–15% on a typical bill, while the €65 billion Social Climate Fund subsidises heat pumps and solar for vulnerable households first.
What is ETS2 — and why does it now start in 2028?
ETS2 is the European Union's second emissions trading system, extending carbon pricing to the fuels burned in buildings and road transport: natural gas, heating oil, LPG and coal sold for heating among them. Fuel suppliers — not households — must buy and surrender allowances for the emissions of the fuel they sell, and the cost passes through to prices at the meter and the tank.
The start date has moved once, and the postponement is now settled law: originally scheduled for 2027, the launch was pushed back by exactly one year to 1 January 2028 as part of the political deal on the EU's 2040 climate-target package, formally adopted in March 2026. The delay changed the timing, not the direction. Allowance auctioning still begins in 2027 to pre-fund the Social Climate Fund, and fuel suppliers' monitoring, reporting and verification obligations run right through 2027.
| Year | ETS2 milestone |
|---|---|
| 2025–2026 | Fuel suppliers monitor and report the emissions of fuels sold |
| March 2026 | One-year postponement to 2028 formally adopted |
| 2027 | Allowance auctions begin, pre-funding the Social Climate Fund; reporting and verification continue |
| 1 Jan 2028 | The carbon price applies to heating and road-transport fuels |
| 2030 | Scenarios range from ~€57–60 nominal (the soft-cap level) to €100/t and above if abatement lags |
How much will ETS2 add to gas and oil heating bills?
The working rule of thumb: every €50 per tonne of CO2 adds about 1 cent per kWh to natural gas — typically a 10–15% increase on a household gas bill — and roughly 13 cents per litre to heating oil. At an allowance price of €59 per tonne, analyses put the extra annual cost for a gas-heated household at €84–210 depending on consumption.
Where the price actually lands is the open question. Launch-year forecasts cluster around €45–75 per tonne. The system includes a price-containment mechanism: if allowances trade above about €45 per tonne in 2020 prices — roughly €57–60 nominal by 2030 — the market stability reserve releases additional allowances — 20 million per trigger under the 2023 rules, doubled to 40 million (up to 80 million a year) under a June 2026 Council–Parliament agreement that still awaits formal adoption. That is a brake, not a hard ceiling: modelled 2030 outcomes range from around €100 per tonne to well above €200 if building renovation and heat pump uptake lag the cap. The honest message for building owners is asymmetric exposure — the floor of the range is manageable, the ceiling is not, and every euro of it lands exclusively on fossil fuel users.
What is the Social Climate Fund and who gets the money?
The Social Climate Fund is ETS2's compensation arm: €65 billion of EU funding for 2026–2032, rising to at least €86.7 billion with mandatory national co-financing, explicitly earmarked for heat pumps, solar installations, renovation and clean mobility for vulnerable households and micro-enterprises. Because it is financed from allowance auctions that begin in 2027, the support money starts flowing before the carbon price ever appears on a bill.
Member States channel the fund through national Social Climate Plans, which were due by 30 June 2025 and have been moving through Commission approval since late 2025 — the current approval status and open schemes should be checked with each national programme. For installers, the fund is a subsidised demand pipeline aimed at exactly the households least able to pay upfront; for owners, it is the first place to look before financing a heating swap alone. Which national grants exist today is mapped in the European heat pump grants overview.
The sequencing is the policy's deliberate design: money out in 2026–2027, price in from 2028. A vulnerable household that uses an SCF-backed scheme to install a heat pump or solar water heater before the launch date never experiences the carbon price as a net cost — which is exactly the behaviour the head start that support money gets over the carbon price is built to produce.
How does ETS2 change the heat pump vs gas boiler calculation?
It tilts an already-moving comparison further. A heat pump with a SCOP of 3.5 delivers 3.5 kWh of heat per kWh of electricity, so each cent that ETS2 adds to gas moves the running-cost crossover in the heat pump's favour — electricity generation already carries a carbon price under the original ETS, so the change lands on the fossil side of the ledger only. The full arithmetic is worked through in heat pump vs gas boiler running costs.
A worked example makes it tangible. A home burning 12,000 kWh of gas per year faces roughly €140 of ETS2 cost at €59 per tonne using the cent-per-kWh rule above — squarely inside the €84–210 range the household studies report. The same home heated by a SCOP-3.5 heat pump draws about 3,400 kWh of electricity carrying no new ETS2 charge at all. The carbon price does not decide the comparison by itself, but it adds a recurring, probably growing line to one column and nothing to the other.
ETS2 does not arrive alone. The EPBD has banned subsidies for standalone fossil boilers since January 2025 and requires zero-emission new buildings from 2028–2030; the F-Gas Regulation is simultaneously rebuilding the heat pump product range around R290. Fossil heating becomes structurally more expensive from 2027–2028 while the alternatives are subsidised first — auction revenues fund the Social Climate Fund a year before households pay the price. The market is already responding: European heat pump sales grew 13% in 2025 to 2.88 million units (EHPA).
Does solar water heating hedge against the carbon price?
Directly. Every kilowatt-hour of hot water delivered by a solar collector is a kilowatt-hour of gas or oil never bought — and never carbon-priced. A solar thermal system covering a solar fraction of 60–70% of annual hot water demand removes that slice of ETS2 exposure for the 25-year life of the collectors, and unlike financial hedges it removes the underlying fuel cost too.
The payback arithmetic shifts accordingly: carbon pricing shortens every solar payback period calculated on today's fuel prices, a point worked through in the solar water heater payback analysis. For buildings that keep a boiler, the hybrid route pays twice — the EPBD still allows subsidies for boiler-plus-solar combinations while standalone boilers get nothing, and the solar share is permanently outside the carbon price.
What should owners, installers and distributors do before 2028?
Building owners with gas or oil heating should budget for the surcharge from January 2028, check their national Social Climate Fund schemes, and time heating decisions to natural replacement moments — a boiler replaced with a heat pump or hybridised with solar in 2026–2027 never pays the carbon price at all. Waiting for the first priced heating season means competing for installer capacity with everyone else who waited.
Installers gain a concrete consultative-selling tool: the 2027 auction start, the 2028 launch and the cent-per-kWh arithmetic above turn an abstract policy story into a line on a quotation. Distributors should expect demand to pull forward through 2027 as deadline publicity builds, and stock accordingly. Solimpeks, manufacturing solar collectors, heat pumps and storage tanks since 2001, sits deliberately on the unpriced side of this transition — its products are the hedge the regulation rewards.
Frequently asked questions
When does ETS2 actually start?
The carbon price applies to heating and transport fuels from 1 January 2028, after the EU formally adopted a one-year postponement from 2027 in March 2026. Allowance auctions still begin in 2027, pre-funding the Social Climate Fund before the price reaches consumers.
How much more will gas heating cost under ETS2?
Roughly 1 cent per kWh for every €50 per tonne of CO2 — about 10–15% on a typical household gas bill. At €59 per tonne, studies estimate €84–210 extra per year for a gas-heated home; heating oil rises about 13 cents per litre at comparable prices.
Is there a maximum ETS2 carbon price?
Not a hard one. If prices exceed about €45 per tonne in 2020 prices — roughly €57–60 nominal by 2030 — the market stability reserve releases extra allowances to cool the market — 20 million per trigger today, doubling to 40 million (up to 80 million a year) under a June 2026 agreement awaiting formal adoption. Modelled 2030 scenarios still range from around €100 to over €200 per tonne if emissions fall too slowly.
Who actually pays under ETS2 — households or fuel suppliers?
Fuel suppliers hold the legal obligation to buy and surrender allowances, and they pass the cost through in fuel prices. Households pay at the meter in proportion to the fossil fuel they burn — which is why heat pumps and solar thermal remove the exposure entirely.
Can the Social Climate Fund pay for my heat pump or solar system?
Potentially, yes. The fund — €65 billion of EU money for 2026–2032, at least €86.7 billion with national co-financing — explicitly targets heat pumps, solar installations and renovation for vulnerable households. Access runs through national Social Climate Plans, so eligibility and amounts depend on your country's scheme.