An essential decarbonisation tool
For the second time in less than five years, the European Union is facing the billion-euro consequences of its exposure to imported fossil fuels. This weighs on competitiveness, raises energy bills and weakens energy security.
The structural solution out of this dependency is clear: doubling down on the EU’s clean energy transition. At its core sits the EU Emissions Trading System (ETS), Europe’s most effective decarbonisation tool.
Since 2005, emissions in ETS sectors have fallen by around 50%, while the EU economy grew by nearly 30%. This shows that the system is effectively reducing emissions while supporting growth.
This matters especially in today’s energy crisis. By putting a price on carbon and incentivising clean, domestic energy, the ETS directly tackles the very root cause of the latest crises: overdependence on imported fossil fuels. Scrapping this successful system entirely not only would undermine climate targets but also reduce investment certainty and prolong industry’s exposure to volatile energy prices.
Growing consensus to stay the course
This reality is increasingly recognised at EU level. Despite pressure from industrial players, a broader consensus is emerging: the ETS is working and should remain the backbone of EU climate policy.
On 19 March, Commission President von der Leyen stated that “the Emissions Trading System is working”, while stressing the need to modernise it and make it more flexible.
But maintaining political support depends on outcomes.
As the reviews of the market stability reserve (MSR) and the overall ETS approach, the challenge lies in balancing decarbonisation with industrial competitiveness and ensuring a just transition across Member States with different starting points.
Eurelectric’s priorities for the ETS review
Against this backdrop, in its letter to Commissioner Hoekstra, Eurelectric underlines that the priority now is to preserve a predictable and robust carbon market, while updating it to reflect new economic and geopolitical realities.
The letter outlines three concrete priorities, including:
1. A predictable and meaningful carbon price: a stable carbon price is essential to drive investment in clean technologies. The system should avoid excessive volatility and ensure liquidity in the long term. Key measures include:
- Making the Market Stability Reserve more flexible
- Avoiding ad hoc interventions that weaken investor confidence
- Strengthening anti-volatility safeguards
2. An ETS that supports industrial competitiveness: the ETS should anchor Europe’s industrial strategy and accelerate decarbonisation. This means:
- Recycling ETS revenues into industrial innovation and clean investments through the ETS Investment Booster and the Industrial Decarbonisation Bank.
- Supporting sectors exposed to carbon leakage through CBAM and other measures
- Strengthening tools such as the Innovation Fund, ETS Investment Booster and Industrial Decarbonisation Bank
3. A socially just transition: the transition must work for all Europeans. Social acceptance is critical to long-term success. Eurelectric calls for:
- A predictable rollout of ETS2 for buildings and transport
- Targeted support for vulnerable households and businesses
- Stronger solidarity tools, including an updated Modernisation Fund
Looking ahead to the ETS reform
The upcoming review is a pivotal moment for Europe’s carbon market. A well-calibrated ETS can deliver three objectives at once: faster decarbonisation, stronger industrial competitiveness and greater energy security. But this requires stability, predictability and fairness across the system.
Eurelectric stands ready to support a balanced reform that reinforces the ETS as the backbone of Europe’s climate policy – and a driver of its clean energy future.