EU Commission proposes slower carbon cuts in emissions trading system

The European Commission has unveiled a draft reform of the EU Emissions Trading System (ETS) that would slow the rate at which the annual supply of carbon permits is reduced. From 2031 to 2035 the linear reduction factor would be cut to 3.7 % per year and to 1.7 % from 2036 onward, versus the current 4.4 % schedule. The proposal also keeps a larger share of free permits for energy‑intensive industries, extending the free allocation to 2038 and linking 80 % of those permits to approved decarbonisation investment plans.

The revision expands the scope of the ETS to include municipal waste‑incineration (phased in 2031‑34), flights covering routes up to 5 000 km from the EU (starting 2029), and ships below 400 gross tonnes. At the same time the Commission says at least half of the revenue from auctioned permits must be directed to industrial decarbonisation, a substantial increase from the current roughly 5 % share.

The changes are presented as a way to keep the EU on track to cut net greenhouse‑gas emissions by 90 % by 2040 and achieve climate‑neutrality by 2050, while easing competitive pressure on heavy industry. Member states are divided: countries such as Poland, Italy and Hungary support the easing, whereas the Netherlands, Denmark, Spain and several northern states oppose it. The ETS covers about 40 % of EU emissions and generates roughly €80 per tonne of CO₂.