Roads to Reform: How Transport Found Its Way into the EU Carbon Market

Sammanfattning

This thesis examines why road transport was initially excluded from the EU Emissions Trading System (EU ETS) and what factors contributed to its later inclusion in the EU ETS 2. This thesis will examine how environmental, economic, and political factors contributed to the shift in policy through the lens of the theories of liberal Intergovernmentalism (LI) and neofunctionalism. The research uses a qualitative design and offers a dual-theoretical explanation of the evolving dynamics in EU climate governance. It draws on semi-structured expert interviews, a systematic literature review, and a thematic analysis of academic sources. The initial exclusion of road transport is best understood through Li, which highlights national governments’ resistance due to political sensitivity, economic costs, and distributional concerns. Rising fuel prices, public backlash, and administrative complexity made carbon pricing in transport a politically risky proposition. At the same time, neofunctionalism offers insight into the European Commission’s early strategic deferral, showing how supranational actors initially avoided politically contentious sectors. Over time, however, functional pressures, institutional learning, and growing climate urgency renewed momentum for integration. Including road transport in ETS 2 reflects a convergence of supranational leadership, evolving policy norms, and national compromise. The Social Climate Fund (SCF) and the creation of a separate trading system illustrate how interstate bargaining and social equity concerns influenced the final design. The findings from this research paper highlight that a theoretical approach combining two theories is recommended to explain how the EU both promotes and limits climate policy integration. Ultimately, this thesis highlights that incorporating road transport into the carbon trading system has been a gradual process, marked by debates stemming from diverse national interests within the EU, varying EU-level goals, and shifting public opinion, which has evolved over time. This highlights a broader challenge for the EU and its climate agenda, which involves incorporating aspects of carbon market expansion in a manner that is perceived as both fair for the people living in the union and successful as a vital tool to help reach the EU’s ultimate goal of climate neutrality by 2050.