EU ETS Overhaul Ties Free Carbon Permits to Decarbonization Pledges Starting 2031

The European Commission has revised its Emissions Trading System to require heavy industries like steel and cement to commit to binding decarbonization investments in Europe to receive free carbon permits after 2031. Free allowances will phase out by 2038, but companies must submit audited plans and meet milestones or face permit revocation and market-rate carbon taxes. Investors support the change because it replaces vague ESG promises with enforceable contracts, making carbon risk easier to price. The policy will also affect African exporters supplying the EU market, as European buyers will demand certified low-carbon footprints to protect their own permit allocations. This effectively extends EU carbon compliance costs into global supply chains.