Fortum’s views on the revision of the EU ETS Directive

Ahead of the expected ETS reform proposal from the Commission in July, Fortum highlights the need for a stable and credible ETS framework that supports investments and strengthens European competitiveness.

Our key asks for the upcoming revision:

• Maintain ETS as core decarbonisation tool: The EU ETS should remain the primary, technology-neutral instrument for reducing emissions, with a clear emissions trajectory and linear reduction factor (LRF) that ensures the cap reaches zero by 2039, preserving system credibility and predictability.
• Strengthen market stability and scope: The market stability reserve (MSR) must stay volume-based to balance allowance supply and avoid political interventions that increase uncertainty. The ETS scope should expand to include domestic, high-quality carbon removals and municipal waste incineration to address hard-to-abate sectors and stabilize the market.
• Optimize funding and policy coherence: ETS auction revenues should be strategically invested in industrial decarbonisation at both EU and member state levels, favoring EU-level excellence-based funding. The revision should enhance coherence between ETS, renewable energy, energy efficiency, CBAM, and industrial policies to protect the carbon price signal.
• Support industrial protection and market linking: Short-term protections like free allocation and indirect cost compensation may be needed for energy-intensive industries until CBAM is fully effective, linked to credible decarbonisation plans. Fortum supports linking the EU ETS with other ambitious carbon markets, especially the UK ETS, while cautiously allowing international credits without weakening the system’s integrity.

Read our more detailed views in the attached document.