The European Union has proposed significant reforms to its Emissions Trading System (ETS), responding to pressure from carbon-intensive industries and member states like Italy and Poland. Key changes include extending free carbon allowances for companies that invest in decarbonization until 2038, instead of the previously planned 2034. Starting in 2036, manufacturers will also be allowed to purchase international carbon credits from projects outside the EU to meet their emissions targets. The reforms also address flights and the waste sector. Flights outside Europe under 5,000 kilometers, such as Frankfurt to Dubai, will be covered by the ETS, while longer routes are exempt for now. Private jets will be included. The waste sector will be gradually integrated, with possible exemptions for member states meeting recycling targets. The planned ETS 2 for road transport and building heating has been pushed back to at least 2028. The EU separately set a target for clean electricity to reach 46 percent of final energy consumption by 2040, double current levels. The reforms aim to balance climate ambition with maintaining industrial competitiveness against the US and China, but critics worry the concessions weaken the core carbon pricing mechanism.
