With climate ambitions in question, EU reforms carbon market

With climate ambitions in question, EU reforms carbon market Andrew Zinin Chief Editor The European Union on Friday unveils reforms to its carbon market after fierce wrangling among countries, industry and activists over the pace of the bloc's climate push. Brussels has been under intense pressure to overhaul the two-decade-old Emissions Trading System (ETS) as the 27-nation EU seeks to shore up industry while tackling high energy costs. In the face of the spike in energy prices caused by the U.S.–Iran war and record heat waves in Europe, advocates have been pushing for the EU to stick to its ambitious climate goals. But caught between the United States and China, momentum has shifted to a more pro-business stance since the start of European Commission chief Ursula von der Leyen's second mandate in 2024—prompting a rollback of environmental rules that marked her first term. In a bid to appease countries such as Italy, Poland and the Czech Republic, her executive looks set to grant companies extra wiggle room. The ETS was already scheduled for review, but the July overhaul has become a political flashpoint pitting those carbon-intensive economies against the system's defenders, such as Spain and the Scandinavian nations. Separately, the EU is also set to present a target to bolster the use of clean electricity from renewable sources rather than fossil fuels by 2040, with electricity still representing only 23% of final energy consumption in the bloc. Waste and flights? Since 2005, the EU's carbon trading system has sought to tackle climate change by curbing pollution from power producers and energy-intensive industries such as steel, cement and chemicals. The ETS forces heavy polluters to pay for the greenhouse gases they emit, obliging them to buy allowances that are capped in number, sold at auctions and tradable. The price of a tonne of carbon dioxide varies, currently standing at around 80 euros ($91), while the total number of permits shrinks over time to encourage emission cuts. To support the transition, companies receive some free allowances, but these are gradually reduced and were initially due to disappear by 2034. Now the commission is expected to propose greater flexibility for industry, with conditions. This could mean free allowances being phased out more slowly and extended beyond 2034, provided companies commit to long-term decarbonization. At the member-state level, Brussels will push countries to channel revenues from the ETS into decarbonizing industry—an area in which performance varies widely. The EU also has to decide whether to extend the scheme to cover the waste sector and international flights departing from the bloc—a move strongly opposed by airlines. Other sensitive topics include the role it determines carbon capture technology can play for businesses and whether they can acquire carbon credits from programs outside the EU that would count toward their emissions reductions. 'Backtracking' Accusing the ETS of pushing up electricity prices and symbolizing EU bureaucracy, large segments of European industry—notably Germany's chemical sector—have turned on the carbon trading scheme and say it needs an overhaul. But not all sectors are in favor of watering it down. Neil Makaroff, a specialist in the ecological transition at the Strategic Perspectives think tank, said, "It is often the sectors that have invested very little" in decarbonization at the European level that are the most critical of the ETS. "Conversely, other companies have chosen to invest heavily in Europe in decarbonization and electrification, in sectors such as steel, cement and glass," he said. "For them, backtracking would mean losing their pioneering advantage." One collateral victim in the reforms is likely to be "ETS 2"—the planned extension of carbon pricing to road transport and building heating, which has already been pushed back from 2027 to 2028 at the request of countries including Poland and Hungary. © 2026 AFP