The European Union has introduced proposals to slow the pace of carbon emission reductions for businesses, a move that would alter the bloc's long-standing climate policy. The proposed reforms to the EU's emissions trading system (ETS) would grant industries more time to decrease their greenhouse gas output than initially planned.
Under the revised rules, certain industries could receive emission allowances until 2038, extending the deadline from the previous target of 2034. This extension is contingent upon these businesses committing to investments in decarbonization efforts. EU climate commissioner Wopke Hoekstra described the approach as "more business-friendly and, may I say so, savvy."
The European Commission, the EU's legislative arm, stated that these changes aim to align the ETS with the EU's broader goal of achieving a 90% reduction in carbon emissions by 2040, relative to 1990 levels. The ETS, established in 2005, is the primary mechanism the EU employs to curb greenhouse gas emissions.
However, the ETS has faced criticism from several member states, with Italy notably characterizing the trading scheme as a de facto tax that has contributed to artificially high energy prices. The system requires industries and power plants within Europe to purchase permits, or allowances, for each ton of carbon dioxide they emit, thereby creating a financial incentive to adopt cleaner technologies. Companies have the option to purchase additional permits or trade them, and some receive free permits to maintain competitiveness against foreign companies not subject to similar carbon costs.
Currently, the ETS caps the number of permits issued annually to ensure emissions decline. The European Commission has proposed modifying the rate at which this cap is reduced. The suggested change involves slowing the annual reduction rate to approximately 3.7% starting in 2031, and further to 1.7% from 2036, down from the current rate of 4.3%.
As part of these proposed adjustments, the EU also plans to continue providing free permits until 2038, diverging from the original plan to phase them out by 2034. At that point, free permits were to be replaced by a carbon border charge on imports for specific sectors. The Commission would also provide companies with plans for decarbonization investments in Europe with 80% of their free permits upfront, with the remaining 20% released upon completion of those investments.
Responses to the proposals have varied. Poland's climate minister, Paulina Hennig-Kloska, indicated that Poland would advocate for further weakening of the policy, calling the proposed softening of the stance a "huge success for Poland." Conversely, Green politicians expressed concern. Michael Bloss, a German Member of the European Parliament, warned that the plans could lead to "gigantic climate pollution" and a diminished quality of life for future generations.
The proposed reforms must still be approved by EU member states and lawmakers, a legislative process that is anticipated to take about a year.