The European Commission is set to propose changes to its Emissions Trading System (ETS) on July 17, aiming to balance climate goals with industrial competitiveness. The draft would extend carbon allowances into the 2040s, reversing the current phase-out by 2039, and grant an extra EUR 6 billion in free carbon permits to heat producers, fuel users, and companies covered by the carbon border tax (CBAM) past its original 2034 expiration. The proposal also recommends slowing the mandatory annual emissions reduction rate of 4.3% by lowering the linear reduction factor. In exchange, member states would be required to use carbon revenue to fund green technologies, international offset projects, and cleaner energy transitions. This marks a significant shift in EU climate policy as it tries to prevent domestic industries from relocating to regions with weaker carbon pricing.
