EU Carbon Market Overhaul Plan Explained: Key Changes to ETS

The European Union is moving forward with a major overhaul of its carbon market, the Emissions Trading System (ETS). This plan aims to tighten supply and raise the cost of pollution permits to accelerate decarbonization across power and industry sectors. Key changes include expanding the ETS to cover shipping, phasing out free allowances for aviation, and introducing a separate carbon price for buildings and road transport. The reforms are designed to align with the EU's 2030 climate target of cutting emissions by 55% from 1990 levels. For market participants, the overhaul means higher carbon prices and more sectors exposed to compliance costs. This will directly impact corporate strategy, renewable energy investment, and carbon credit demand in Europe.