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- Today, the European Commission published its proposal to revise the EU Emissions Trading System (EU ETS) for the period after 2030. This EU flagship climate policy puts a price on emissions from power generation, heavy industry, aviation and shipping – covering around 35% of the EU’s total greenhouse gas emissions. It is a central tool for creating the incentives and mobilising the investment needed for Europe’s industrial transformation.
- The revision comes amid intense political pressure over industrial competitiveness, energy costs and the future direction of EU climate policy. The ETS has become one of the most politically contested files of this mandate and a key test of whether Europe can strengthen the investment case for cleaner industry while maintaining a credible and politically durable climate framework.
- It is also the first major building block in the revision of the EU’s wider post-2030 climate and energy policy framework, following the adoption of the 2040 climate target and alongside broader reforms intended to strengthen European competitiveness. The choices made on the ETS will therefore help shape the EU’s climate, energy and industrial policy throughout the 2030s.
- The commission proposal combines a slower decline in the supply of emission allowances with new flexibilities around carbon removals and international carbon credits for meeting the EU’s climate targets. It would extend free allowances for industries both protected and not protected against carbon leakage by the EU’s carbon border adjustment mechanism, while making this support more conditional on decarbonisation investments. It would also create a new funding instrument – the Industrial Decarbonisation Bank – to channel additional funding towards industrial transformation projects.
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Elisa Giannelli, Programme Lead at E3G, said:
“Europe cannot build strategic independence by weakening the policies that underpin it. Today’s proposal might please some, but it risks increasing both the long-term cost and the time needed to deliver the EU’s growth strategy. Co-legislators must now send an unambiguous signal to the first-movers who are already investing in the transition.”
Pepe Escrig, Senior Researcher at E3G, said:
“The Commission has held onto some of the essential foundations of the EU ETS, but yielded to political pressure to weaken it as a quick fix to broader challenges. The result pulls in two directions: strengthening support for industrial investment while weakening parts of the framework meant to drive it. Parliament and Council must restore the capacity of the ETS to drive a credible carbon price, generate robust revenues to invest in Europe’s long-term competitiveness, and prevent shifting further emissions reduction efforts to agriculture, transport and households, which in turn may endanger reaching the overall climate ambitions for 2040 and 2050.”
Aleksandra Waliszewska, Senior Researcher at E3G, said:
“The Commission proposal takes important steps to strengthen the investment capacity of the EU ETS, but it still falls short of a comprehensive investment framework for industrial decarbonisation. Positive elements include partial conditionality of free allocation on decarbonisation investments, a binding floor for national revenue spending in ETS-covered sectors, and the Industrial Decarbonisation Bank. But these are accompanied by measures that could undermine long-term confidence in the carbon price. The upcoming negotiations should reinforce the investment logic across the package.”
Read more from E3G on the EU ETS:
