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How should Europe respond to the energy shock?

A stronger emissions trading system would do far more for resilience than fuel-tax reductions

    • The European Union Emissions Trading System remains the most efficient instrument for limiting harmful emissions.
    • The European Union Emissions Trading System remains the most efficient instrument for limiting harmful emissions. PHOTO: REUTERS
    Published Fri, May 8, 2026 · 07:00 AM

    SINCE Israel and the US launched their war on Iran in February, global energy prices have skyrocketed, with crude oil reaching nearly US$115 a barrel at the beginning of May.

    While this shock has hit low-income countries the hardest, it also places significant strain on high-income Europe. But it presents an opportunity for Europe to reinvigorate its green transition – and European governments are failing to seize it.

    By highlighting the risks associated with dependence on foreign oil and making fossil fuels less competitive vis-a-vis renewables, the current price shock makes the political and economic case for the green transition stronger than ever.