A strong EU ETS is Europe’s most important investment signal

A proven foundation for Europe’s transition

The EU ETS has reduced emissions, provided a technology-neutral framework and encouraged investment in cleaner solutions. Looking ahead, Europe must advance climate ambition, competitiveness and resilience together.

Protecting the carbon price signal

Several elements of the Commission’s EU ETS proposal could create uncertainty around the carbon price signal:

• a weaker linear reduction factor (LRF);
• changes to the Market Stability Reserve (MSR);
• conditionality attached to free allocation; and
• the inclusion of international carbon credits and domestic carbon removals.

Further analysis is needed to understand their combined effect on allowance supply and the risk of weakening the carbon price signal.

A strong carbon price remains essential for investment in industrial decarbonisation, electrification, hydrogen and e-fuels. At a time when Europe must accelerate investment in clean technologies, weakening the emissions-cap trajectory could undermine business confidence.

Competitiveness through investment and electrification

We support strengthening Europe’s competitiveness through electrification, innovation and targeted funding instruments—not by weakening the carbon price. A growing share of EU ETS revenues should be used to help energy-intensive industries electrify their operations and invest in low-carbon production. By improving access to funding for industrial electrification projects, Europe can accelerate emissions reductions while strengthening the competitiveness of its industrial base.

Read our views in full below.