EU proposes dilution of emissions trading system to ease industrial pressure
The European Commission’s revised ETS framework extends pollution caps into the 2040s, reducing the linear reduction factor and introducing external carbon offsets, drawing criticism from environmental groups over 2040 target feasibility.
The European Commission has unveiled a proposal to significantly revise the EU Emissions Trading System (ETS), a move that extends the timeline for industrial greenhouse gas emissions well into the 2040s. The update abandons the original legislative target of capping emissions at zero by 2039, effectively weakening one of the bloc’s primary climate policy mechanisms. The Commission stated that the adjustments are necessary to provide relief to industry amid heightened geopolitical and economic pressures.
Central to the revision is a reduction in the linear reduction factor (LRF), which dictates the annual rate at which pollution caps decline. Under the previous framework, the LRF was scheduled to reach zero by 2039, operating at a rate of 4.4 percent between 2031 and 2035. The new proposal lowers this rate to 3.7 percent for the 2031–2035 period and further reduces it to 1.7 percent per year after 2036.
The proposal also alters the landscape for carbon allowances and offsets. Free carbon allowances for sectors covered by the carbon border tax will be extended until 2038, providing continued support to industries facing import competition. Additionally, starting in 2036, the EU will permit industry to purchase carbon offsets from outside the bloc to offset emissions, a change that critics argue could depress offset prices and allow for greater overall pollution.
In response to the changes, the World Wildlife Fund (WWF) expressed strong concern regarding the alignment of the revised ETS with the EU’s legal climate obligations. WWF senior policy officer Camille Maury questioned how the Commission intends to compensate for the additional emissions while still meeting the 2040 target set by the EU Climate Law, noting that any increase in ETS emissions must be offset by deeper cuts elsewhere in the economy.
Concurrently, the Commission released an Electrification Action Plan aimed at accelerating the transition to green energy. This separate initiative includes measures to lower upfront costs for electrification technologies, speed up grid deployment, and future-proof electricity bills. While the WWF welcomed the plan, senior policy officer Arnaud Van Dooren cautioned that electrification alone is not a decarbonization strategy and must be paired with ambitious renewable energy and energy efficiency targets to be effective.
