Fortum’s response to the EC public consultation on the review of ETS

Over its 20-year history, the EU Emissions Trading System (EU ETS) has proven to be highly effective in reducing greenhouse gas emissions in a cost-efficient manner. Emissions in ETS sectors fell by 50% from 2005 to the end of 2024, while non-ETS sectors saw a 20% reduction during the same period. The ETS has also created a unified European carbon market, adding value and harmonising climate mitigation efforts across the EU.

The ETS must remain a cornerstone of EU climate policy beyond 2030. To achieve the 2040 climate target and long-term climate neutrality, a revision of the ETS directive is essential.

To strengthen the ETS over the long term, greater policy coherence, simplification, and technical updates are necessary. Predictability and alignment with other climate policies should be improved, and the ETS should be protected from unintended effects of overlapping measures. Monitoring, reporting, and verification (MRV) procedures, as well as allowance supply calculations, should be simplified. The Market Stability Reserve (MSR) parameters—such as intake and release thresholds—should be updated to maintain effectiveness.

The ETS is a major funding source for the EU and its member states, but transparency and consistency in the use of revenues need improvement. Revenues should support breakthrough technologies and electrification; for example, we support the creation of an Industrial Decarbonisation Bank to drive industrial climate action. EU funding should follow technology-neutral, excellence-based criteria.

To ensure the ETS remains robust and liquid as the cap tightens, its scope must be expanded. Carbon removals, particularly technological solutions, should be integrated into the ETS and the 2040 climate target. Municipal waste incineration and potentially landfilling should also be included. These steps will support the system’s long-term effectiveness and market stability.

Linking the EU ETS with other carbon markets would enhance cost-efficiency and market liquidity. The EU should consider allowing limited use of high-quality international credits aligned with the Paris Agreement’s Article 6, based on a thorough impact assessment.