Overview
- The European Commission presented the reform package on Friday, July 17, 2026, that slows the pace at which the EU Emissions Trading System cap tightens from the earlier post‑2030 trajectory to a 1.7% annual decline in 2036–2040.
- Brussels would extend free allowances to 2038 but make them conditional: firms get 80% upfront if they submit board‑approved decarbonisation plans and must secure the remaining 20% after five years by proving the investments and emissions cuts.
- The proposal broadens ETS coverage and compliance options by adding municipal waste incineration from 2031, many flights from 2029, and allowing limited use of up to 2% international carbon credits from 2036.
- A parallel electrification and fiscal plan aims to raise electricity use in industry and buildings to about 32% by 2030 and to align tax treatment so electricity is not more expensive than gas, backed by billions in ETS‑linked funds reported between €4–6 billion.
- The package now moves to negotiations with member states and the European Parliament, where defenders of strong climate ambition will clash with governments and industries seeking more cost relief, and national authorities will be charged with verifying the withheld allowances.