The European Commission plans to overhaul the EU Emissions Trading System (ETS) by slowing the annual emissions cap reduction from 4.3% to 3.7% starting in 2031, and extending free CO2 permits for industries until the end of 2037 instead of phasing them out in 2034. The changes aim to support industrial competitiveness while still pursuing a 90% net emissions cut by 2040. Under the proposal, companies with decarbonization investment plans in Europe would receive 80% of free permits upfront, with the remaining 20% delivered after investments are made. The plan also tightens rules on how governments spend ETS revenue, requiring 50% to be reinvested in domestic industries. The ETS has generated 260 billion euros since 2013, but some EU countries oppose attaching conditions to free permits. The revision also expands the ETS to cover emissions from international flights departing Europe for destinations up to 5,000 kilometers away, potentially including hubs in Turkey and the Middle East but excluding the United States. EU countries and lawmakers will negotiate the final revision over the next year amid political pushback against Europe's climate agenda.
