# EU ETS reform and electrification plan progress

> Live situation record from CLSTR: https://clstr.news/situations/airquality-monitoring-and-policy-responses-unfold-across-the-united-states-and-europe
> Updated: 2026-08-09T05:00:54.000Z. Sources: 284. Developments: 39.

The European Commission’s July 2026 ETS review kept the linear‑reduction factor at 3.7 % yr⁻¹ for 2031‑35 and 1.7 % yr⁻¹ for 2036‑40, halved the Market‑Stability‑Reserve trigger and linked up to 80 % of free allocations for high‑emitting sectors to verified decarbonisation investment plans. A Sustainable Maritime and Propulsion (SMAP) scheme was added to narrow the price gap between fossil and alternative fuels and to channel ETS revenues to green‑fuel and technology projects.

On 28 July, the Commission unveiled an Electrification Action Plan consisting of 15 actions to raise electricity’s share of final EU energy consumption from 23% to 46% by 2040. The plan aims to cut gas imports by over 70%, oil imports by over 40%, and save up to €260 billion annually. Key measures include lower regulated electricity prices for industry, installing 4 million heat pumps annually by 2030, and expanding electric vehicle uptake.

Further ETS developments include slowing the annual emissions-reduction rate to balance climate ambition with industrial competitiveness, which analysts suggest could allow up to 2 billion additional tonnes of CO2 emissions by 2040. The system’s scope will expand to include waste-incineration plants, small vessels, and certain international flights—specifically departures within 5,000 km of Frankfurt. The latter expansion has drawn concerns from the International Air Transport Association (IATA) regarding duplicate compliance costs. 

Industry groups and a coalition of member states (including Poland, Italy, and the Czech Republic) continue to push for slower reduction rates and higher free permits, while others (Germany, France, and the Netherlands) support the draft. A €100 billion Industrial Decarbonisation Bank and an “ETS Investment Booster” of €400 million are earmarked for qualifying firms.

## Claims

- The European Commission proposed on 17 July to lower the EU‑ETS annual emissions‑allowance reduction rate to 3.7 % for 2031‑2035 and 1.7 % for 2036‑2040. (single source)
- Free allocation of emission allowances for steel and cement will be extended until 2038, subject to firms submitting decarbonisation investment plans. (single source)
- The ETS will be expanded to cover waste‑incineration facilities, small vessels and certain international flights. (single source)
- Domestic steel producers have received more than €71 billion in free EU‑ETS allowances since 2005. (single source)
- Member states are split on the reform: Poland, Italy, Czech Republic, Hungary and Bulgaria want further easing; Germany, France and the Netherlands support the draft; Nordic countries and Spain say it (single source)
- The July package also includes an Electrification Action Plan aiming to make Europe the world’s first fully electro‑powered continent. (single source)
- The Carbon Border Adjustment Mechanism (CBAM) does not provide export refunds, limiting fairness for exporters. (single source)

## Timeline

### 2026-08-09: European Commission unveils plan to reach 46% electrification by 2040

The European Commission's Electrification Action Plan aims to raise electricity's share of EU energy consumption to 46% by 2040 through industry, transport, and building sector reforms.

2 sources. https://clstr.news/cluster/european-commission-unveils-plan-to-reach-46-electrification-by-2040

### 2026-08-05: EU Emissions Trading System Reform Aims to Balance Climate Goals and Industry

EU Commission's 2026 ETS overhaul slows cap decline, adds credits and industrial support, and expands to flights within 5,000 km of Frankfurt, prompting airline concerns over higher airfares and duplicate costs

6 sources. https://clstr.news/cluster/eu-emissions-trading-system-reform-aims-to-balance-climate-goals-and-industry

### 2026-07-31: EU ETS Review Proposes Looser Emission Caps Amid Industry Pressure

EU Commission's ETS review seeks to balance climate goals with industry needs, expanding sectors and adding negative‑emission tools, but slows annual cuts and keeps free permits for firms like ArcelorMittal and

2 sources. https://clstr.news/cluster/eu-ets-review-proposes-looser-emission-caps-amid-industry-pressure

### 2026-07-28: EU Commission proposes EU ETS reform with slower emission cuts

EU Commission proposes EU‑ETS reform: slower annual cuts, extended free allowances for steel and cement, broader sector coverage, and an electrification plan, amid split views among member states.

4 sources. https://clstr.news/cluster/eu-commission-proposes-eu-ets-reform-with-slower-emission-cuts

### 2026-07-28: European Commission targets 46% electricity share in EU consumption by 2040

The EU Commission’s plan seeks to double electricity’s share to 46 % by 2040, aiming to cut fossil‑fuel imports and save €260 bn annually, while Czech homes increasingly adopt rooftop solar for energy self‑suff

3 sources. https://clstr.news/cluster/european-commission-targets-46-electricity-share-in-eu-consumption-by-2040

### 2026-07-27: Poland Rejects EU Proposal to Transfer ETS Revenue to EU Budget

Poland opposes EU plans to divert 30% of ETS auction revenues to the EU budget, seeks slower allowance cuts, and welcomes the inclusion of waste incineration in ETS as a step easing costs for households.

2 sources. https://clstr.news/cluster/poland-rejects-eu-proposal-to-transfer-ets-revenue-to-eu-budget

### 2026-07-23: EU targets 46% electricity share by 2040, faces criticism

The EU commission’s 2026 plan seeks 46% electricity in the energy mix by 2040, promoting heat pumps, EVs and efficient data centres, but critics call the target unrealistic.

3 sources. https://clstr.news/cluster/eu-targets-46-electricity-share-by-2040-faces-criticism

### 2026-07-22: EU proposes ETS reform to fund decarbonisation, sparks finance debate

EU Commission's ETS reform would force members to spend half of auction revenues on decarbonisation, aiming to cut energy costs, but finance ministers—particularly in Poland where ETS costs dominate electricity

2 sources. https://clstr.news/cluster/eu-proposes-ets-reform-to-fund-decarbonisation-sparks-finance-debate

### 2026-07-21: EU advances overhaul of emissions trading system

EU ministers in Dublin discussed an ETS reform that keeps free permits, links them to decarbonisation plans, slows cap reductions and adds post‑2040 auctions, seeking bloc agreement by end‑2026.

8 sources. https://clstr.news/cluster/eu-moves-to-overhaul-emissions-trading-system-ahead-of-2027-deadline

### 2026-07-20: EU electricity planning to boost capacity and aim for 46% demand by 2040

Spain's energy ministry proposes 2030 grid capacity boosts while the EU sets a 46% electricity demand target for 2040, forecasting €240 bn yearly savings.

7 sources. https://clstr.news/cluster/eu-electricity-planning-to-boost-capacity-and-aim-for-46-demand-by-2040

### 2026-07-20: EU Commission proposes extending free ETS allowances for CBAM sectors to 2038

The EU Commission proposes extending free ETS allowances for CBAM sectors to 2038, revises the ETS linear reduction factor, allows limited international credits, and earmarks €100 bn for an Industrial Decarbon‑

4 sources. https://clstr.news/cluster/eu-commission-proposes-extending-free-ets-allowances-for-cbam-sectors-to-2038

### 2026-07-20: EU Commission proposes ETS overhaul and 2040 electrification goal

The EU Commission released a review of the ETS, supporting shipping's green transition and adding a target for 46% of EU energy to be electrified by 2040, alongside broader climate goals.

3 sources. https://clstr.news/cluster/eu-commission-proposes-ets-overhaul-and-2040-electrification-goal

### 2026-07-19: EU Commission delays emissions cuts amid heatwave concerns

A heatwave spurs the European Commission to extend EU emissions‑trading deadlines, potentially slowing short‑term CO₂ cuts.

5 sources. https://clstr.news/cluster/eu-commission-delays-emissions-cuts-amid-heatwave-concerns

### 2026-07-18: Ursula von der Leyen defends EU emissions trading system amid climate targets

Ursula von der Leyen highlighted the EU ETS’s 39% emissions cut and 71% sector growth in 2026, while recalling her 2020 pledge for a 55% emissions reduction by 2030 and major climate spending from the recovery‑

2 sources. https://clstr.news/cluster/ursula-von-der-leyen-defends-eu-emissions-trading-system-amid-climate-targets

### 2026-07-18: EU unveils plan to double electricity's share to 46% by 2040

EU Commission proposes to raise electricity’s share to 46% of energy use by 2040, cutting oil and gas imports and targeting €260 bn annual savings.

4 sources. https://clstr.news/cluster/eu-unveils-plan-to-double-electricity-share-to-46-by-2040-aiming-to-become-first-electric-continent

### 2026-07-17: EU emissions‑trading reform draws criticism from Finnish leaders

EU Commission proposes slower ETS allowance reductions and broader sector coverage; Finnish politicians and industry warn it weakens climate policy and may hurt competitiveness.

5 sources. https://clstr.news/cluster/eu-emissionstrading-reform-draws-criticism-from-finnish-leaders

### 2026-07-16: European Commission proposes sweeping ETS reform to slow emissions cuts and boost industry funding

EU Commission proposes sweeping ETS overhaul: slower emissions cap decline (3.7% 2031‑35, 1.7% 2036‑40), more free permits, €100 bn industrial decarbonisation fund, and limited international credits.

47 sources. https://clstr.news/cluster/eu-commission-unveils-major-overhaul-of-eu-carbon-market

### 2026-07-16: EU ETS Reform and German Industry Job Losses amid Energy Crisis

EU ETS reform, high energy costs, and foreign competition drive major job losses in German industry, especially automotive, while regional initiatives in Germany and Austria push for cheaper electricity zones,

11 sources. https://clstr.news/cluster/eu-carbon-market-reform-fuels-concern-over-german-industrial-job-losses

### 2026-07-15: European Commission sets 46% electrification target by 2040

The European Commission unveiled an Electrification Action Plan targeting 46 % electricity share by 2040 and €260 billion annual fossil‑fuel import savings, alongside an ETS revision that slows allowance cuts,

86 sources. https://clstr.news/cluster/eu-ets-reform-triggers-debate-over-emissions-revenue-use

### 2026-07-15: Poland Leads Coalition to Push Pragmatic EU ETS Reform Ahead of Commission Proposal

Poland heads a 10‑12‑nation coalition urging the EU to slow ETS allowance cuts, raise free permits and extend the Modernisation Fund before the Commission’s July 17 proposal.

8 sources. https://clstr.news/cluster/eu-ets-reform-debate-pits-poland-and-allies-against-moderate-eu-capitals

### 2026-07-15: EU ministers negotiate methane emissions rules and ETS2 carbon tax

EU ministers will debate methane export rules and a proposed ETS2 carbon tax, with several member states urging delays and revisions amid industry and energy‑security concerns.

4 sources. https://clstr.news/cluster/eu-ministers-negotiate-methane-emissions-rules-and-ets2-carbon-tax

### 2026-07-14: EU ETS revision faces industry pushback and ten‑member opposition

EU proposes an ETS overhaul with extended free permits and a slower cap cut, while ten member states and industry groups push back, fearing competitiveness loss and demanding a rethink of the new ETS2 carbon‑pr

26 sources. https://clstr.news/cluster/eu-unveils-major-overhaul-of-emissions-trading-system

### 2026-07-09: European Parliament tightens carbon border adjustment mechanism rules

The European Parliament approved a tighter CBAM, setting Q2 2026 certificate price at €75.28, expanding scope to steel and aluminium products, creating a decarbonisation fund from 2027 and removing the “emergy‑

2 sources. https://clstr.news/cluster/european-parliament-tightens-carbon-border-adjustment-mechanism-rules

### 2026-07-08: JPMorgan upgrades European steel stocks amid EU protection measures

JPMorgan and UBS lifted price targets and upgraded ratings for ArcelorMittal, while JPMorgan boosted Salzgitter and voestalpine to Overweight, citing EU steel protection measures and higher expected European 钢价

4 sources. https://clstr.news/cluster/arcelormittal-receives-higher-price-targets-from-ubs-and-jpmorgan

### 2026-07-07: EU to soften emissions‑trading rules and extend free carbon permits for industry

EU Commission plans to overhaul the ETS, extending free carbon permits worth €6 bn, slowing cut rates and adding an investment booster to keep industry competitive while targeting a 90 % emissions cut by 2040.

5 sources. https://clstr.news/cluster/european-peoples-party-pushes-to-loosen-eu-carbon-market-rules

### 2026-07-07: EU expands carbon border tax to more products, automotive industry warns of cost impact

EU Parliament committees voted to extend the carbon border tax to more downstream steel and aluminium products and tighten loopholes, while the car industry warns the move could raise costs and urges delays.

9 sources. https://clstr.news/cluster/european-parliament-expands-carbon-border-tax-and-pushes-decarbonisation-fund-ahead

### 2026-06-24: EU plans more free emission permits for industry and pushes ETS2 rollout

The EU Commission will grant more free emission permits to industry from Jan 2027, tying them to decarbonisation investments, while a coalition of 60+ groups urges fast rollout of a separate ETS for buildings &

3 sources. https://clstr.news/cluster/eu-plans-more-free-emission-permits-for-industry-and-pushes-ets2-rollout

### 2026-06-18: European Steel Industry Faces Crisis Amid Overcapacity and Rising Energy Costs

UNESID warns Europe’s steel sector faces a crisis from global overcapacity, rising imports and energy costs, urging stronger EU trade‑defence measures and public‑procurement support.

2 sources. https://clstr.news/cluster/european-steel-industry-faces-crisis-amid-overcapacity-and-rising-energy-costs

### 2026-06-18: EU Leaders Approve Higher Climate Target and New Competitiveness Plan

EU leaders in Brussels raised the 2030 emissions target to 60 %, approved an energy‑diversification plan and set a July 2026 deadline for revising the EU ETS to boost competitiveness.

2 sources. https://clstr.news/cluster/eu-leaders-approve-higher-climate-target-and-new-competitiveness-plan

### 2026-06-17: European Heavy Industry Groups Urge EU to Ease Carbon Trading Rules

Over 30 European heavy‑industry firms, including Arcelor‑Mittal and BASF, have urged EU leaders to reform the Emissions Trading System, warning that high carbon costs threaten competitiveness and could shift生产出

2 sources. https://clstr.news/cluster/european-heavy-industry-groups-urge-eu-to-ease-carbon-trading-rules

### 2026-06-17: ArcelorMittal shares stay above key resistance as EU emissions reform looms

ArcelorMittal shares held above €56.60 resistance at €57.82 as the firm urges EU emissions‑trading reform, warning of a possible 30‑40% steel output cut and up to 5 million jobs at risk; investors note real‑‑‑‑

2 sources. https://clstr.news/cluster/arcelormittal-shares-stay-above-key-resistance-as-eu-emissions-reform-looms

### 2026-06-17: European steelmakers demand EU ETS reform to protect jobs

ArcelorMittal, Thyssenkrupp Steel and Voestalpine call for EU‑ETS reform, warning that current rules could raise costs 50 %, cut output 30‑40 % and threaten up to five million jobs.

3 sources. https://clstr.news/cluster/european-steelmakers-demand-eu-ets-reform-to-protect-jobs

### 2026-06-11: European steel sector attracts investment and expects higher year‑end prices

European steel executives see policy‑driven investment boost and expect hot‑rolled coil prices to reach €700‑€800/t by year‑end, though high energy costs and capacity risks remain.

2 sources. https://clstr.news/cluster/european-steel-sector-attracts-investment-and-expects-higher-yearend-prices

### 2026-06-11: EU moves to extend free ETS emission allowances into the 2040s

EU Commission may extend free ETS allowances past 2039, conditional on EU investment, to ease industry pressure, especially in coal‑dependent Poland; proposals due July.

2 sources. https://clstr.news/cluster/eu-moves-to-extend-free-ets-emission-allowances-into-the-2040s

### 2026-06-04: Air Pollution Threatens Health and Accelerates Brain Aging as Climate Change Intensifies Alerts

Climate change may double air‑quality alerts, affecting millions, while long‑term PM2.5 exposure hastens cognitive decline, especially among older Black adults.

2 sources. https://clstr.news/cluster/air-pollution-threatens-health-and-accelerates-brain-aging-as-climate-change-intensifies-alerts

### 2026-05-18: European Commission lowers EU ETS benchmarks for steel sector

EU Commission releases lower 2026‑2030 ETS benchmarks for steel, keeping free allowances at ~75% and costing €4 bn.

2 sources. https://clstr.news/cluster/european-commission-lowers-eu-ets-benchmarks-for-steel-sector

### 2026-05-17: Canadian Study Links Low‑Level Air Pollution to Cognitive Decline

A Canadian study of 7,000 adults finds low‑level PM2.5 and NO₂ exposure linked to poorer cognition and subtle brain damage, especially in women.

2 sources. https://clstr.news/cluster/canadian-study-links-lowlevel-air-pollution-to-cognitive-decline

### 2026-05-13: Spanish research unveils celiac‑digesting enzyme and estimates 146,500 premature deaths from air pollution in Europe

Spanish teams develop a stomach‑active gluten‑degrading enzyme and estimate 146.5 k premature deaths from short‑term air‑pollution spikes in Europe.

5 sources. https://clstr.news/cluster/spanish-research-unveils-celiacdigesting-enzyme-and-estimates-146500-premature-deaths-from-air-pollu

### 2026-05-13: Air Pollution Linked to Higher Risk of Neurodegenerative Diseases in Scandinavia

Long‑term air pollution raises risk and speeds progression of ALS, Lewy body disease and Parkinson‑related dementia in Sweden and Denmark.

2 sources. https://clstr.news/cluster/air-pollution-linked-to-higher-risk-of-neurodegenerative-diseases-in-scandinavia

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Cite as: EU ETS reform and electrification plan progress. CLSTR, https://clstr.news/situations/airquality-monitoring-and-policy-responses-unfold-across-the-united-states-and-europe