The EU Emissions Trading System faces political pressure from energy intensive industries and governments seeking to weaken carbon constraints. This analysis explores why dismantling the ETS would be economic self sabotage, as the carbon price signal is essential for driving renewable energy deployment and reducing fossil fuel imports. Proposed reforms focus on updating the Market Stability Reserve to prevent extreme price spikes and repurposing free allocations into an Industrial Decarbonization Bank. These changes aim to maintain the integrity of the carbon market while providing concrete financial support for verifiable green investments.
