Full Breakdown
EU Emissions Trading System Faces Political Pressure and Reform Proposals in 2026
5/8/2026, 9:47:46 PM
Political Push to Weaken the ETS
Early in 2026, energy-intensive firms and several member states, led by Italy, urged the EU to suspend or substantially weaken the Emissions Trading System (ETS). At the same time, the European Commission approved Austrian and Spanish compensation schemes to offset ETS-related electricity cost increases for firms at risk of relocation.
ETS Track Record and Market Status
Launched in 2005, the ETS has cut EU greenhouse-gas emissions by 37 % versus 1990, with a 50 % drop in power and industry emissions since 2005. Carbon prices now average €75 /tonne, after peaking at €100 /tonne in 2023.
Principal Actors
Key voices include Bruegel researchers Simone Tagliapietra and Georg Zachmann, Professor Stefano Caserini (University of Parma), Jos Delbeke (European University Institute), EU Commission President Ursula von der Leyen, and the European Commission itself.
Key Figures and Financial Data
The ETS now generates €258 billion in auction revenue. Projected carbon prices range from €150-200 /tonne before 2030 to €250-400 /tonne by 2040. Austria’s aid scheme, budgeted at €900 million, may refund up to 75 % of ETS-based emissions costs; Spain’s amendment raises the refund ceiling to 80 %. The MSR holds a 3 % buffer of about 370 million allowances.
Commission Statements
The Commission said the Austrian and Spanish measures aim to curb relocation risk and limit emissions leakage. It confirmed a formal ETS and MSR review for the second half of 2026, alongside the Clean Industrial Deal, and noted that free fertilizer allowances will be extended beyond 2034.
Industry and Academic Opposition
Italian industry and the government argue that carbon costs raise electricity prices, hurt competitiveness and risk production moving abroad. Over 200 Italian scientists and economists signed an open letter warning that suspending the ETS would jeopardise EU climate targets and industrial resilience.
Disputed Analyses
Analysts disagree on whether high electricity prices stem mainly from natural-gas markets or the ETS carbon price. The Italian proposal offers no concrete alternative to the ETS, and the emissions impact of expanded free allowances remains unquantified.
Selected Direct Quotes
- “attacking the ETS amounts to economic self-sabotage.” — Simone Tagliapietra and Georg Zachmann, Bruegel researchers
- “The Italian government, pushed by the most backward segment of the national industrial system, has proposed no alternative option or possible amendment – but that’s not surprising.” — Stefano Caserini, University of Parma
- “Their call for its suspension, ignoring the fact the ETS is essential for meeting international commitments, is consistent with the disinterest shown by some part of the populist far right in climate policy…” — Stefano Caserini, University of Parma
- “refund of up to 75 % of the ETS-based emissions costs incurred in the previous year.” — Austrian compensation scheme description, European Commission
Future Outlook
The 2026 review will examine MSR redesign to limit price spikes, repurpose free allocation via an Industrial Decarbonisation Bank, and incorporate high-quality Article 6 credits. A possible ETS-ETS2 merger and extended fertilizer allowances are also under consideration, shaping the EU’s ability to keep a unified carbon price while protecting industry competitiveness.
