The European Commission has proposed a major revision to the EU Emissions Trading System (ETS), slowing the pace of emissions cuts and extending free pollution permits for industries like steel and cement until 2038. Under the new rules, starting in 2031, companies will only receive free allowances if they commit to investing in decarbonisation projects within Europe. The value of those investments must at least match the financial value of the free permits they receive. Investors like Storebrand Asset Management and Aberdeen Investments say the policy could replace vague voluntary ESG disclosures with standardised, audited decarbonisation plans. Companies that fail to submit credible investment plans or miss milestones risk losing their free permits. The proposal is part of a broader EU effort to keep industrial investment in Europe rather than the US or China, though critics warn the overall weakening of the carbon price signal may reduce incentives to cut emissions.
