The European Union has announced a proposal to adjust its primary climate policy, the Emissions Trading System (ETS), by providing companies with more time to reduce their greenhouse gas emissions. Established in 2005, the system mandates that power plants and industrial facilities purchase permits for each tonne of CO2 produced, serving as a financial driver for cleaner technology adoption.
Under the new draft, the rate at which annual emission caps decrease would drop from the current 4.3% to approximately 3.7% starting in 2031, falling further to 1.7% by 2036. Additionally, the distribution of free permits, initially scheduled to end in 2034, would be extended until 2038 for industries that commit to decarbonisation investments. Companies could receive 80% of these free allowances upfront, with the remaining 20% released upon the completion of their green projects.
EU Climate Commissioner Wopke Hoekstra described the update as a more pragmatic approach for businesses. While the European Commission claims these changes remain consistent with the goal of reaching a 90% emissions reduction by 2040, the proposal faces mixed reactions. Polish climate minister Paulina Hennig-Kloska welcomed the shift, though she suggested further relaxation may be sought. Conversely, German MEP Michael Bloss warned that the policy could lead to significant pollution levels. The legislation still requires approval from national governments and parliament members, a process expected to take at least one year.