The European Commission is preparing to revise the EU’s emissions trading system, seeking a balance between climate goals and the needs of industry. The upcoming decisions will show how far Brussels is willing to go to strengthen competitiveness while maintaining the system’s environmental integrity.
EU ETS currently covers up to 45% of the bloc’s total greenhouse gas emissions, affecting more than 12,000 installations. On 17 July, the Commission is set to unveil its proposals for modifying the system, with expectations ranging from a simple continuation to a more profound overhaul.
The system, based on the cap-and-trade principle, has been in place since 2005. Critics argue it now needs adjustment to prevent European industry from falling behind competitors in the US and China, especially as carbon prices hover between 80 and 120 euros per tonne.
Key proposals on the table
In April 2026, the Commission outlined initial directions. One of the key proposals is to suspend the automatic invalidation of allowances in the Market Stability Reserve above the 400 million threshold, making it easier to intervene during energy price shocks. Another is to adjust the benchmarks used for free allocations, slowing the pace at which free allowances are reduced.
Brussels also wants 30% of ETS revenues – around 10 billion euros annually – to go directly to the EU budget as so-called own resources. This proposal has already met with resistance from many member states.
Poland and the push for a lower reduction rate
Poland, together with Italy and eight other countries, has called for a radical reduction of the Linear Reduction Factor from 4.3% to 2.4% per year. This would slow the annual decline in the total allowance cap and give industry more breathing room.
– The system that has proven effective in reducing CO2 emissions must now become part of the EU’s emerging industrial policy – said the representatives of ten member states in a letter to the Commission.
The Polish electricity industry association PKEE also urges the EU to define the future of the Modernisation Fund beyond 2030, as the current trading phase ends that year. The fund has been a key source of financing for green investments in countries with lower GDP per capita.
Meanwhile, the Carbon Border Adjustment Mechanism complicates the picture. Free allowances for sectors covered by CBAM – steel, cement, aluminium, fertilisers – are to be phased out by 2.5% annually from 2026, reaching zero in 2034. Industrial producers argue that without free allowances, they will face double costs, while imports merely pay at the border.
The Commission’s presentation on 17 July is only the beginning of a long legislative process. Both the European Parliament and the Council will have their say, and final agreement is unlikely before 2027. The coming months will test the EU’s ability to reconcile climate ambition with industrial survival.
Źródło: WNP.PL, Fot. Open stock 01 / Shutterstock
