Last year the eu set up a second ets to bring in some previously excluded sectors, such as road transport and domestic heating, by 2027. For fear of a political backlash, this “ets2” has a clause to suppress its carbon price, should it rise above €45 a tonne in the first three years. Still, the aim is to reduce these sectors’ emissions by 42% by 2030, compared with 2005, and to issue no new permits for them after 2044.

These carbon prices should be enough to bring about the lion’s share of the 90% reduction envisaged for 2040, provided that politicians have the courage to avoid interfering if higher carbon prices become too painful for consumers and industry.

The second factor that may help is Russia’s war in Ukraine. When gas prices jumped in 2022, firms were forced to cut their energy use or close production lines. This lowered emissions from ets-covered industries by 5% in 2022 and another 7% in 2023. Although gas prices have now fallen, the disadvantage in fossil-fuel costs compared with America will continue to force firms to adjust, though the eu’s carbon border tax (cbam) will apply in full from 2026, protecting eu industry somewhat by taxing imports based on their carbon content. Renewable energy and grid extensions have also become an easier political sell, as green energy makes Europe depend less on autocratic providers of fossil fuels.

The third factor is low-cost green kit from China that will cheapen the transition. In Spain, Europe’s sunniest country, electricity is practically free during the day. As the solar boom continues, power generation will become emissions-free much faster than previously thought. At the same time, cheap Chinese electric vehicles (evs) are entering the market, lowering costs for drivers wishing to go green.