The EU Emissions Trading System is up for review in 2026, and a new briefing from E3G argues it needs to do more than just put a price on carbon. The authors say the ETS is being squeezed by three things: political moves that could lower the carbon price, pressure to keep handing out free allowances, and proposals to divert auction revenue to other EU budget needs. Without changes, the system risks becoming a weaker price signal with fewer resources for actual industrial projects. The briefing recommends four actions: protect the carbon price from caps or corridors, make sure national ETS revenues are spent on decarbonisation, create an Industrial Decarbonisation Bank to fund projects where the price gap is the main barrier, and reform free allowances into a conditional bridge that requires real emissions cuts. The idea is to turn the ETS from a compliance tool into a proper investment engine for European industry.
