Europe faces a defining choice amid geopolitical instability, energy price volatility, and intensifying global competition. The European Union Emissions Trading System (ETS) is central to the Union’s industrial and energy strategy. It drives clean investment, reinforces energy security, generates substantial fiscal revenues, and underpins Europe’s credibility for investors.
Recent weeks have seen growing calls for revision or suspension of the EU ETS. The system has been accused of driving high energy prices and harming competitiveness. These calls come from a limited number of actors and do not reflect the wider industry position.
The war in Iran has once again shown the real culprit: Europe’s dependence on fossil fuels. The resulting price surge will hit industry and households hard; yet fossil costs do not come with free allocation to shield industry, nor does it raise revenues that can be used to support vulnerable households or invest in clean solutions.
The evidence is clear: the ETS is not the problem.
It has cut emissions in covered sectors by half since 2005 while GDP grew by nearly a quarter. The ETS contributes on average just 11% to final electricity bills for energy-intensive industry – which are largely compensated in fifteen Member States – and significantly less in several Member States with less carbon-intensive electricity generation. Overall, industry has been a net beneficiary, receiving at least four times more support through ETS revenues and the Innovation Fund than the carbon costs paid since 2021.
The ETS is foundational to Europe’s independence, security, and competitiveness because it:
- Encourages investment in renewables, grids, storage and the modernisation of energy-intensive industries;
- Strengthens Europe’s fiscal capacity through substantial and predictable revenues that support clean investment without increasing debt;
- Enhances the EU’s global influence by setting standards in climate and trade policy, reinforced by the Carbon Border Adjustment Mechanism (CBAM).
Weakening the ETS now would undermine investment signals and leave Europe more exposed to fossil fuel shocks. Europe should defend the integrity of its carbon pricing system while delivering the practical enablers needed for industrial transformation.
Key recommendations
- Implement European Commission guidance on electricity grid connections and quickly publish and implement the expected guidance on electricity taxation
- Use existing instruments to provide targeted relief for industry’s electricity costs
- Safeguard the integrity of the single energy market
- Put forward joint EU solutions to address high electricity costs for industries investing in decarbonisation
- Swiftly adopt and strengthen lead market provisions through the Industrial Accelerator Act and adopt differentiated, sector-specific approaches to industry decarbonisation, including through the upcoming ETS review
- Fully implement the existing Electricity Market Directive to enable dynamic tariffs, flexible connections and non-wire solutions
- Scale up Contracts for Difference for renewables and long-term Power Purchase Agreements
- Quickly agree on and implement an ambitious European Grids Package
- Accelerate renewables deployment and invest in non-fossil flexibility and energy storage technology to limit fossil gas setting wholesale prices
- Invest rapidly in new interconnections to enhance resilience, lower systems costs, and protect consumers from price shocks
