The European Commission has proposed two linked policies: a slower reduction in the ETS carbon allowance cap and a plan to electrify buildings, transport, and industry. The ETS linear reduction factor would drop from 4.4% to 3.7% from 2031 and then to 1.7% from 2036, extending the life of allowances into the 2040s. Companies can also use up to 2% of their compliance through high-quality carbon credits from outside Europe. The Electrification Action Plan targets 46% of final energy from electricity by 2040, up from 23% today. It includes measures to lower electricity prices relative to gas, speed up grid connections, and expand smart meters and heat pumps. The Commission estimates this could cut the EU's annual fossil fuel import bill by 260 billion euros by 2040. Both proposals now go to the European Parliament and Council for negotiation.
