Overview
- On Friday the European Commission published a reform that slows the annual reduction of ETS permits to 3.7% for 2031–2035 and 1.7% for 2036–2040, extending the life of auctions and certificates into the 2040s.
- The Commission would keep supplying free allocations into the late 2030s but make 80% available on firms’ decarbonisation plans and 20% only after verified delivery, and it asks member states to devote at least 50% of ETS revenues to industrial decarbonisation while proposing a €100 billion Industrial Decarbonisation Bank.
- The plan widens ETS coverage to include waste incineration, more international flights within roughly a 5,000 km radius and proposes limited use of international carbon credits and certified carbon removals as compliance options.
- Reactions split sharply: industry groups and some member states welcomed relief and targeted finance, while environmental NGOs and many climate politicians warned the changes weaken the ETS price signal and raise verification and accounting risks for offsets and removals.
- The package now goes to the European Parliament and the Council for months of negotiations where lawmakers must decide amendments, set safeguards for credits and removals, and determine whether the changes will still allow the EU to meet its 2040 and 2050 climate goals.