What happened
The European Commission has put forward changes to the EU Emissions Trading System as negotiations begin. Its proposal would revise the annual reduction in the overall allowance pool: 3.7% a year between 2031 and 2035, then 1.7% annually from 2036 to 2040. Free allocations for certain energy-intensive industries would remain available until 2038.
Electricity-sector association Eurelectric is asking policymakers to maintain a reliable and material carbon-price signal. In reporting by edie, the group argues that the revised market must continue to steer capital towards decarbonisation and electrification.
Why it matters
The ETS sets a carbon-cost signal for participating businesses. Eurelectric warns that greater discretion over allowance volumes or price mechanisms could reduce the scheme’s contribution to the EU’s 2040 climate objective. It says a more stable price environment would support investment decisions and limit cost swings.
The association estimates that fossil-fuel heat produces 75% of industrial emissions. It also puts the potential share of industrial energy use suitable for direct electrification by 2035 at 60-90%, and says imported heating fuels cost the EU €450bn in 2024.
What businesses should watch
ETS-covered companies should follow the negotiations, which will determine the trajectory for allowance supply after 2030 and the duration of relevant free allocations. Industrial operators considering electrification will also need to assess how the eventual rules affect carbon-cost assumptions for investment planning.
Eurelectric says the power sector has delivered 75% of emission cuts across ETS sectors and argues that the market should retain sufficient ambition to support the 2040 target.
