The European Commission's long-awaited review of the European Union Emissions Trading System (ETS) has sparked criticism from environmental groups and some lawmakers, who argue the proposed changes could weaken Europe's most effective tool for cutting greenhouse gas emissions. The ETS, which requires the EU's biggest polluters to buy permits to emit carbon dioxide, has been credited with reducing planet-heating emissions by 47% by 2023 compared with 2005 levels. However, the Commission's proposals would give companies a less demanding and cheaper pathway to reduce emissions, extending free pollution permits for heavy industries and slowing the annual reduction in the cap on permits.
Key Changes to the ETS
Under the proposed overhaul, free allowances for polluting sectors such as steel and cement would not be phased out until 2038, rather than 2034 as previously planned. The annual reduction in the cap on permits would slow to 3.7% from 2031, then 1.7% from 2036, compared with the current 4.3%. The Commission also plans to extend the ETS to cover municipal waste, flights within a 5,000km radius of a central point in Europe, and private jets for the first time. Additionally, some emissions cuts after 2036 could come from "high-quality" international carbon credits that fund decarbonisation abroad.
Criticism from Environmental Groups and Lawmakers
Michael Bloss, a German Green MEP, accused the Commission of giving industries "a licence to pollute for even longer and at a lower cost." He said: "Weakening the emissions trading scheme harms companies that create jobs and growth through climate-friendly production. Those who have invested in the industries and the jobs of the future will be penalised." Camille Maury, a senior policy officer at WWF's European policy office, said the proposal "jeopardises a predictable and effective price on pollution that businesses and investors need to invest in clean technologies." She compared the ETS to a Jenga tower: "Just like a Jenga tower, when you start removing building blocks, it destabilises the whole structure."
Industry Reaction and Political Pressure
The Commission has faced pressure from 10 EU member states that argue the ETS contributes to higher energy costs and damages Europe's competitiveness. Italy has led calls to scrap the ETS, while seven member states, including Nordic countries, Spain, and the Netherlands, warned against watering it down. Industry group BusinessEurope welcomed some aspects but raised concerns about new conditionalities for free allocations and the uncertain role for international carbon credits. Markus Beyrer, director general of BusinessEurope, said: "Some aspects of the proposal already raise concerns. For example, new conditionalities for free allocations risk increasing bureaucratic complexity, and the uncertain role for international carbon credits is unsatisfactory."
Commission's Defense and Separate Initiatives
EU climate commissioner Wopke Hoekstra defended the proposals, calling the ETS "a phenomenal asset" and arguing that without it, Europe would have consumed an extra 100bn cubic metres more gas. He said the extra flexibility was needed to ensure "way more investments" on European soil, otherwise "if we just have the industry ship out everyone loses." Separately, the Commission announced a plan to double the rate of electrification of Europe's economy to 46% by 2040 and to phase out the €97bn EU taxpayers spend on fossil fuel subsidies. Energy commissioner Dan Jørgensen said: "We need to replace the black expensive polluting molecules with cheap homegrown electrons."
Next Steps
The draft law must now be agreed among the EU's 27 member states and the European Parliament. Peter Liese, a German lawmaker from the centre-right European People's Party, welcomed the proposals, saying: "Climate protection that leads to unemployment is not a global role model. Investment within the EU is our goal, and this proposal achieves it far more effectively." Ottmar Edenhofer, director of the Potsdam Institute for Climate Impact Research, said the extra flexibility "does not alter the EU's overall climate policy course" and praised the inclusion of permanent carbon dioxide removals.
