The European Commission is set to propose a major reform of the EU Emissions Trading System (ETS) on July 15, with industry, member states, and environmental groups locked in a heated debate. The ETS forces polluters to pay for their CO2 emissions through tradable allowances, but rising energy costs and geopolitical tensions have pushed some countries like Italy and Poland to call for suspending or weakening the system. Key issues include phasing out free allowances by 2034, extending the scheme to waste and aviation, and using ETS revenues for industrial decarbonization. Environmental groups warn the reform could water down the scheme, while industry wants slower phase-out of free permits and caps on carbon prices. The commission is considering tweaks to the stability reserve and benchmark values to shield industry from high energy costs. The outcome will affect the price of carbon, currently around 75 euros per tonne, and the credibility of the EU's climate leadership.
