EU Emissions Trading System Reform Aims to Balance Climate Goals and Industry

The European Commission's July 2026 proposal overhauls the EU Emissions Trading System (ETS), introducing a slower cap decline, re‑introducing international credits, integrating carbon removals, redesigning the Market Stability Reserve and expanding industrial support. The reform aligns the ETS with the EU's 2040 target of a 90% net reduction in greenhouse‑gas emissions, effectively reshaping the carbon market for the 2030s and extending its role to support industrial decarbonisation.

The proposal also expands the ETS geographic scope to cover flights departing the European Economic Area for destinations within 5,000 km of Frankfurt Airport, potentially bringing hubs such as Dubai, Doha and Istanbul into the system. Aviation experts warn this could raise airfares for South African travellers to Europe. The International Air Transport Association (IATA) and airline executives, including IATA Director‑General Willie Walsh, expressed concern over duplicate compliance costs with the ICAO CORSIA scheme and urged the EU to focus on Sustainable Aviation Fuel incentives instead.