Brussels, 17 July – Climate Action Network (CAN) Europe strongly criticises the Commission’s choice to propose heavy weakening of the EU Emissions Trading System (ETS) revision, undermining the EU’s climate, industrial transformation and energy security objectives.
The Commission’s proposal seems to be heavily shaped by lobbying from incumbent industries seeking to preserve free pollution permits and weaken the pace of emissions reductions, rather than by listening to companies that have invested – or are ready to invest – in decarbonisation. The key battle lines are clear: how fast emissions should fall, how quickly free allowances should be phased out, and whether carbon removals and international credits should dilute the ETS.
Loosening rules creates problems elsewhere
Lowering the Linear Reduction Factor to 3.7% from 2031 onwards and 1.7% afterwards, from currently 4.4%, would simply allow more pollution from power plants and heavy industry, while a large part of decarbonised solutions are already available. Those emissions would not disappear. Instead, they would impose additional costs on European citizens and companies, and force deeper and politically more difficult cuts from sectors such as buildings, agriculture and transport if Europe is to meet its legally binding 2040 climate target. CAN Europe is also concerned that a substantial amount of international credits would be allowed in the framework.
Chiara Martinelli, Director of CAN Europe, said:
“Every extra tonne of CO₂ allowed under the ETS makes Europe’s climate challenge harder and more expensive. Weakening the ETS now is a gift to polluters that have prioritised shareholder payouts instead of investing in cleaner production, at the expense of citizens, future generations and those companies which already invested in climate-friendly solutions.”
Free pollution permits and carbon removals
The ETS review must end European industry’s dependence on free pollution permits, which have consistently undermined decarbonisation investments in energy-intensive sectors such as steel. Extending free allocations until 2038 for sectors covered by the Carbon Border Adjustment Mechanism (CBAM) runs counter to the objective of phasing them out, particularly given that some sectors have faced very little – if any – effective carbon price signal in recent years.
Companies receiving free allowances should be required to invest in industrial decarbonisation and implement credible transition plans. Public support must reward genuine transformation, not business as usual or increased shareholder profits. While the proposed conditionality is a step in the right direction, it remains too weak. Free allocations should be granted only to companies that demonstrably deliver real-world emissions reductions through their investments and be subject to a clawback mechanism if they do not.
Greg Van Elsen, Senior Industrial Policy Coordinator at CAN Europe, said:
“Free pollution permits were never meant to become a permanent subsidy. Extending them until 2038 rewards delay instead of industrial decarbonisation. Public support must reward companies that cut emissions, not business as usual or shareholder payouts. Every euro of free allocations should support genuine decarbonisation efforts, with allowances clawed back if companies fail to deliver.”
Allowing carbon removals in the mix would dilute the environmental integrity of the ETS. Carbon removals may have a role in addressing genuinely unavoidable emissions, but they must never become an excuse for delaying emissions reductions at source.
Sven Harmeling, Head of Climate at CAN Europe, said:
“Carbon removals are not a substitute for cutting emissions. Turning them into tradable compliance units would weaken the ETS impact, undermine the carbon price and create new loopholes for polluters instead of accelerating the transition away from fossil fuels. The Commission proposal fails to ensure that only high integrity removal technologies would be considered, risking to result in additional harm to the environment and communities.”
The proposal will now be negotiated by the European Parliament and Member States. It is expected that these negotiations will be pursued with urgency so as to get close to an agreement still within the period of the Irish EU Presidency. CAN Europe calls for strengthening, rather than further weakening, the Commission’s proposal in the course of negotiations.
Notes to editors:
- Seven in ten across Europe say biggest polluters and climate laggards should pay more, challenging rollback of EU ETS
- CAN Europe Letter to Heads of Cabinets of the European Commission on the revision of the Emissions Trading System (ETS) Directive
- CAN Europe position on the EU Emissions Trading System (ETS)
For more information and media requests:
Jani Savolainen, jani.savolainen@caneurope.org, +358504667831