Overview
- The European Commission formally proposed the ETS reform package on Friday, putting slower annual cuts to certificate supply and new financing at the center of its plan.
- The proposal reduces the annual cancellation rate to 3.7% for 2031–2035 and 1.7% for 2036–2040, extending the system into the 2040s and delaying when some sectors must reach net-zero.
- Free allocations are prolonged but redesigned as investment-linked allowances that firms receive only if they make verifiable green investments inside the EU.
- The package widens ETS coverage to waste incineration, additional international flights (within roughly 5,000 km) and parts of shipping, and allows buying up to about 260 million international credits with automatic fallback tightening if high-quality credits are insufficient.
- The Commission pairs relief with major public finance proposals — a proposed €100 billion industrial decarbonisation bank and a requirement that member states reinvest a large share of ETS revenues — and the plan now faces intense debate and revision in the European Parliament and Council.