EU’s €3 Billion ETS2 Frontloading Facility: A Critical Test for Road Transport Decarbonisation
The European Union has taken another significant step in its climate policy agenda with the announcement of a €3 billion ETS2 Frontloading Facility, designed to accelerate decarbonisation investments in sectors covered by the new emissions trading system for buildings and road transport. Jointly announced by the European Commission and the European Investment Bank (EIB), the initiative aims to provide early financial support to Member States ahead of the full rollout of the ETS2 carbon pricing mechanism in 2028.
While the announcement has been welcomed by stakeholders as a positive signal of intent, concerns are growing within the road transport sector that, without clear guidance and explicit prioritisation, commercial road transport risks being left without the predictable and accessible support it needs to transition to zero-emission operations.
Understanding the ETS2 Frontloading Facility
The ETS2 Frontloading Facility is intended to bridge the gap between policy ambition and on-the-ground investment. Under ETS2, a new carbon pricing system will apply to fuels used in buildings and road transport, extending emissions trading beyond power generation and heavy industry. Revenues from this system are expected to begin flowing from 2028, once the mechanism is fully operational.
The newly announced facility allows Member States that have already transposed ETS2 into national law to access funding earlier, enabling them to pre-finance decarbonisation measures before carbon pricing revenues start to accumulate. In theory, this frontloading approach should help smooth the transition, accelerate early investments, and reduce the economic shock associated with higher fuel prices once ETS2 comes into force.
However, at this stage, the announcement remains high-level. The European Commission and the EIB have yet to publish detailed information on how the facility will be structured, how funds will be allocated, or what conditions will apply to Member States seeking access.
Lack of Clarity Raises Red Flags for Road Transport
While the communication surrounding the facility broadly states that it will support clean investments in both buildings and road transport, it provides only general examples when it comes to transport-related measures. Crucially, there is no indication of how funding will be prioritised, whether commercial road transport will be explicitly targeted, or how consistency across Member States will be ensured.
This lack of clarity has raised concerns within the road transport industry, particularly among operators who are already facing rising costs and mounting regulatory pressure.
Raluca Marian, IRU EU Director, welcomed the facility in principle but warned of the risks associated with vague implementation:
The EUR 3 billion ETS2 Frontloading Facility is a welcome development. But unless the European Commission and European Investment Bank set a clear direction on where financial support should flow, there is no guarantee that road transport operators will have effective access to the investment instruments linked to the system, with very divergent practices expected across Member States.
Without explicit guidance at EU level, Member States may adopt widely differing approaches to ETS2-related funding, creating an uneven playing field for transport operators and undermining the internal market.
Investment Predictability: A Make-or-Break Factor
For commercial road transport, investment predictability is not a secondary issue—it is fundamental to the success of the transition. Decarbonising road freight and passenger transport requires long-term planning, substantial capital expenditure, and confidence that public support mechanisms will be available and stable over time.
IRU has repeatedly stressed that the sector needs explicit conditions attached to ETS2 funding instruments to ensure that commercial road transport decarbonisation is not sidelined.
For investment predictability, our sector needs explicit conditions attached to this facility that ensure support for commercial road transport decarbonisation, Marian added.
Without such conditions, there is a real risk that funding will be absorbed disproportionately by other sectors, particularly buildings, leaving road transport operators to shoulder higher carbon costs without adequate support.
The 2028 Challenge: Costs Rise Before Benefits Materialise
The uncertainty surrounding the Frontloading Facility mirrors broader concerns about how ETS2 will function once it becomes fully operational in 2028.
Under ETS2, a carbon price will be applied to fuels used in road transport, with the additional costs expected to be passed on through higher diesel and petrol prices. While this mechanism is designed to incentivise emissions reductions, it will also lead to higher operating costs for transport operators—especially in the early years of the transition.
At the same time, there is no automatic guarantee that a meaningful share of ETS2 revenues will be reinvested into greening road transport. Without earmarking or clear policy direction, revenues could be diverted to other priorities, leaving the sector exposed to carbon costs without corresponding investment support.
A Fair and Workable Transition Depends on Reinvestment
IRU has consistently underlined that ETS2 can only deliver a socially fair and economically workable transition if carbon cost exposure is matched by accessible and predictable investment support.
This support must cover the full range of requirements needed to decarbonise commercial road transport, including:
- Zero-emission vehicles, such as battery-electric and hydrogen-powered trucks and buses
- Depot charging and refuelling infrastructure
- Grid connections and capacity upgrades
- Public and private charging infrastructure deployment, particularly along key freight corridors
These needs are especially acute for small and medium-sized enterprises (SMEs), which make up a large share of Europe’s road transport sector and often lack the financial resilience to absorb high upfront costs.
Progress Is Real, but Barriers Remain
There is no doubt that progress is being made. Zero-emission heavy-duty vehicles are entering the market at an accelerating pace, and infrastructure deployment is advancing across several Member States. Manufacturers are expanding their electric and hydrogen portfolios, while logistics operators are piloting new technologies in real-world conditions.
However, the transition remains highly capital-intensive. The upfront cost of zero-emission trucks is still significantly higher than that of conventional diesel vehicles. In addition, depot charging installations often require costly grid upgrades, long permitting processes, and coordination with electricity network operators.
Earlier this month, IRU, together with ACEA and Transport & Environment (T&E), highlighted the importance of continuity in EU-level infrastructure funding, warning that several existing funding instruments are approaching exhaustion. Without a clear successor framework, there is a risk that infrastructure rollout will slow just as vehicle availability begins to scale up.
Aligning Vehicles and Infrastructure
One of the key lessons from previous policy initiatives is that vehicle rollout and infrastructure deployment must be aligned. Supporting vehicle purchases without sufficient charging or refuelling infrastructure leads to underutilisation and inefficiencies. Conversely, investing in infrastructure without a critical mass of vehicles risks stranded assets.
Ensuring alignment requires coordinated planning, long-term funding visibility, and close cooperation between EU institutions, Member States, industry, and infrastructure providers. The ETS2 Frontloading Facility could play a crucial role in this alignment—but only if it is designed and implemented with sufficient specificity.
The Role of National Social Climate Plans
IRU is therefore calling on the European Commission to work closely with Member States to ensure that commercial road transport is properly reflected in national Social Climate Plans and ETS2-related funding measures.
Social Climate Plans are intended to mitigate the social and economic impacts of carbon pricing, particularly on vulnerable groups. For commercial road transport, this means recognising the sector’s essential role in the economy and ensuring that operators have access to practical investment pathways to reduce emissions.
Without such recognition, there is a risk that the burden of ETS2 will fall disproportionately on transport operators, with knock-on effects for supply chains, consumer prices, and regional connectivity.
A Defining Moment for EU Transport Policy
As the EU moves closer to the implementation of ETS2, the decisions taken now on funding design, prioritisation, and governance will have long-lasting consequences. The €3 billion Frontloading Facility has the potential to accelerate decarbonisation and build confidence across the market—but only if it delivers clarity, predictability, and fairness.
Raluca Marian emphasised the stakes involved:
Aligning cost exposure with accessible investment pathways will be key to delivering a successful, effective and socially fair transition.
For Europe’s road transport sector, the message is clear: ambition must be matched with action, and carbon pricing must go hand in hand with targeted, reliable investment support. Only then can ETS2 become a true catalyst for decarbonisation rather than an additional cost burden on an already challenged industry.
Source Link:https://www.iru.org/news-resources/newsroom