The European Commission has proposed changes to the EU Emissions Trading System that slow the annual emissions cap reduction from 4.3% to 3.7% in 2031 and further to 1.7% in 2036. The plan also gives heavy industry an extra 6 billion euros in free permits through softened carbon efficiency benchmarks between 2026 and 2030. This shift puts more pressure on national governments, requiring them to spend at least half of ETS revenue on domestic industry rather than relying on the carbon price alone to drive decarbonization. The reform directly threatens projects like Stegra's green steel plant in Boden, Sweden, which depends on a strong carbon price to compete with traditional steelmakers. By slowing the cap and handing free permits to existing carbon-intensive producers, the Commission risks undermining investments in hydrogen-based steel production. The article highlights a tension between short-term industrial competitiveness and long-term decarbonization goals, a key issue for anyone tracking carbon market design and clean energy finance.
