The European Union has unveiled proposals to slow the pace at which businesses must cut greenhouse gas emissions, extending deadlines for some industries to obtain emission allowances until 2038 instead of 2034 — a move that's drawn sharp criticism from environmental groups who warn it undermines the bloc's climate credibility.
The reforms would relax the rules of the EU's emissions trading system, or ETS, giving businesses more time to reduce their carbon output than previously planned. Companies would receive extensions if they commit to investing in decarbonisation efforts, but critics say the policy rewards polluters rather than pushing them toward urgent action.
The Policy Shift
EU climate commissioner Wopke Hoekstra defended the changes as a "more business-friendly and, may I say so, savvy approach." The European Commission said the reforms would ensure the ETS aligned with the EU's goal to reduce carbon emissions by 90% by 2040, compared with 1990 levels. But the concessions to industry represent a significant retreat from the bloc's earlier timeline.
Under the proposals, the Commission would slow the rate at which the annual emissions cap is lowered — to around 3.7% from 2031 and then to 1.7% from 2036, down from 4.3% currently. The EU also proposes continuing free permits until 2038, rather than ending them in 2034, when they were to be replaced by a carbon border charge on imports for some sectors.
Introduced in 2005, the ETS requires Europe's industries and power plants to buy a permit for every tonne of carbon dioxide they emit, creating a financial incentive to invest in cleaner technologies. Companies can buy extra permits or trade them. Some businesses are given permits for free to help them compete with foreign firms that don't pay carbon costs. The ETS also caps the number of permits released each year to ensure emissions decrease.
Industry Gets What It Wanted
The Commission would offer 80% of free permits up front to companies with plans to invest in decarbonisation in Europe. Businesses would get the remaining 20% once those investments are made. It's a structure that shifts the risk away from polluters and onto the climate itself.
The ETS has come under criticism from a number of member states, with Italy in particular condemning the trading scheme as a de facto tax that has helped keep energy prices artificially high. Responding to the proposals, Polish climate minister Paulina Hennig-Kloska said Poland would push to weaken the policy further. "For the first time, we are seeing a softening of the stance rather than a toughening of it — this is a huge success for Poland. Although we will fight for more," she said.
Green Backlash
But Green politicians were less impressed. A German member of the European Parliament, Michael Bloss, said the plans would result in "gigantic climate pollution" and the next generation would have a worse quality of life as a result.
The criticism reflects a broader tension within European climate policy: the gap between the EU's stated ambitions and the political willingness to impose costs on industry. Global temperatures have been rising over the past century due to human activities that release greenhouse gases emissions, but local or regional geography shapes the speed at which different places are warming. As Europe is warming particularly quickly, it's being more exposed to frequent and stronger spells of extreme heat.
This year, more than a dozen countries across western, central and eastern Europe broke their June temperature record. Some countries, such as Hungary, Czech Republic and Germany, faced temperatures above 40C. The proposals still need to be approved by EU countries and lawmakers, a process that could take a year.
Why This Matters:
The EU's decision to extend free emissions permits and slow the pace of carbon cap reductions reveals the political limits of climate action when industry lobbying intensifies. While the Commission frames this as pragmatic adjustment, environmental advocates see it as a retreat at precisely the moment when Europe is experiencing record-breaking heat and the climate crisis demands acceleration, not delay. The next generation will inherit the consequences of these compromises — not just in carbon budgets, but in the precedent that when business complains loudly enough, climate deadlines can be pushed back. If the EU cannot hold the line on its own flagship climate policy during a year when more than a dozen European countries broke June temperature records, the credibility of the 2040 target comes into question. The gap between Europe's climate rhetoric and its willingness to impose costs on polluters has never been clearer.