The European Commission will propose an overhaul of the EU's Emissions Trading System on Friday, giving industries longer to emit CO2 while promising more financial support for clean technology investments in Europe. The bloc's biggest climate policy is being adjusted, once again, to keep industry calm and the machinery of profit moving.
Brussels Balances, Industry Collects
The ETS forces power plants, airlines and shipping firms to buy permits when they emit CO2 and caps their overall emissions. That is the official script. The real arrangement is more familiar: a market built by the EU executive to price pollution, then softened when companies and governments complain that the rules bite too hard. The Commission has long been preparing the overhaul, extending the system into future decades and aligning it with the EU's 2040 climate goal to cut net emissions by 90%.
Pressure from industries and countries, including Italy and Poland, has pushed the Commission toward a gentler version of the same system. They say it undermines competitiveness. Brussels is trying to balance those concerns with warnings, including from Spain, that weakening the ETS would punish industries that spent early on cutting emissions. The language is technocratic. The power is not. The Commission plans to cut the annual rate at which the ETS emissions cap falls to around 3.7% from 2031, down from 4.3% currently, and reduce it further from 2036, EU officials told Reuters on Thursday. The proposals were still being negotiated and could change before publication, and a Commission spokesperson declined to comment.
Who Gets the Relief
The EU gives industries some CO2 permits for free to help them stay competitive. An EU CO2 permit currently trades at around €79 ($90) per metric ton. The Commission will propose continuing free permits until the end of 2037, rather than ending them in 2034, when they were due to be replaced by the EU's carbon border charge on imports. That would also likely delay the full phase-in of the carbon border levy to end-2037, the officials said.
The proposal would attach conditions to free permits, granting 80% upfront to companies with plans to invest in decarbonisation in Europe. Companies would get the remaining 20% once those investments are made, the officials said. The Commission also wants stricter rules on how governments spend ETS revenue, so that 50% is reinvested in domestic industries. Since 2013, the ETS has generated €260 billion in revenue. The money is there. The question is who gets to steer it, and for whose benefit.
Ten countries, including Poland and Italy, opposed parts of the EU plans this week, including attaching conditions to industries' free permits. EU countries and lawmakers will negotiate the final ETS revision over the next year. Another round of bargaining. Another layer of management. The people breathing the air don't get a seat at the table; the states and firms do.
Fortress Europe, Carbon Edition
The Commission proposal would expand the ETS to cover emissions from international flights departing Europe for destinations up to 5,000 kilometres away, the officials said. That could capture emissions from flights to hubs in Turkey and the Middle East, but exclude the United States. The American Chamber of Commerce this week warned that extending the EU ETS to international flights risked "potentially provoking retaliatory measures from key international partners." Even here, the border logic stays intact: regulate movement, price movement, protect the market, and call it climate policy.
The overhaul comes amid political pushback against Europe's climate agenda, despite record-breaking heatwaves and wildfires. Brussels has already weakened environmental rules for cars and farmers after industry concerns. Some governments have urged the EU to uphold ambition on the ETS, partly because a weaker ETS would increase pressure on politically sensitive sectors, such as farming and forestry, to cut emissions faster. The system covers 40% of all EU emissions, and emissions from ETS-covered sectors have halved since 2005.
The Commission says it is managing transition. The record says it is managing capital, state revenue and industrial pressure inside the same enclosure. The market gets redesigned. The permits keep flowing. The institutions keep calling it climate action.