Brussels wants to slow the annual decline in the EU ETS emissions cap and steer more carbon-market revenues to covered industries to support decarbonization investment.
The European Commission plans to revise the EU Emissions Trading System by slowing the rate at which the overall emissions cap shrinks each year, easing the pace at which permits become scarcer as Brussels tries to give heavy industry more room to invest in low-carbon technologies. The proposal also calls for the bloc’s 27 member states to direct more revenues from the carbon market toward sectors that pay into the ETS, in an effort to support their decarbonization. The move updates a broader overhaul of the EU ETS, the bloc’s main carbon market, whose current design would otherwise exhaust available CO2 permits in 2039. The system has required industries and power plants since 2005 to buy permits for each metric ton of CO2 they emit, and it also applies to flights and shipping within Europe, plus 50% of emissions from international shipping voyages to or from an EU port. It operates across all 27 EU countries as well as Iceland, Liechtenstein and Norway, and is linked with Switzerland’s ETS. Brussels is trying to extend the scheme into the 2030s while aligning it with the EU’s 2040 target to cut net emissions by 90%. The review comes at a politically sensitive moment, with countries including Italy and Poland arguing Europe’s green agenda is hurting industrial competitiveness, while Sweden and Denmark want to preserve a strong carbon price. The ETS covers around 40% of EU emissions and has generated €260 billion in revenues since 2013. Emissions from covered sectors have halved since 2005, largely because power-sector cuts responded to carbon pricing faster than heavy industry did.