July 20, 2026 16:23
The European Commission has presented a proposal to revise the EU Emissions Trading System (ETS), aiming to focus the scheme more closely on industrial investment.
The planned Industrial Decarbonisation Bank is expected to mobilise €100 billion to support European industry. Its initial component, the ETS Investment Booster, is expected to be launched before 2030 with planned funding of €30 billion. A further €70 billion would become available from 2031.
Under the proposal, Member States would also be required to allocate at least 50% of their national ETS revenues to investments in decarbonising the sectors concerned.
The European Commission has also proposed changing the Linear Reduction Factor (LRF). It would be set at 3.7% for 2031–2035 and 1.7% from 2036, making the trajectory more gradual and consistent with the EU’s 2040 climate target.
“Contributions by industry should flow back to industry,” said European Commission President Ursula von der Leyen (pictured). “This approach encourages and rewards those that invest in the clean transition - and incentivises those who struggle to catch up.”
The shift has been welcomed by the plastics industry. “Maintaining free allocation beyond 2030, alongside the Commission’s proposal to improve ETS benchmarks for the 2026–2030 period and better reflect industrial realities, will help provide greater investment certainty for Europe’s energy-intensive industries,” said Virginia Janssens (pictured), Managing Director of PlasticsEurope. 
“We also welcome the proposal to reinvest ETS revenues back into industry’s decarbonisation trajectories, and to extend the ETS to municipal waste incineration.”
“It is particularly encouraging to see that the proposal includes circular economy measures among the activities eligible for financing through Member States’ ETS revenues,” she added. “This is an important signal and recognition that circularity is a key pathway for reducing emissions in ETS sectors.”
Cefic, which represents the European chemical industry, has nevertheless raised several concerns. Its main criticism is that the proposal fails to adequately address escalating CO2 costs in the short and medium term.
“Europe’s industry is losing ground at an alarming pace,” said Markus Kamieth, President of the European Chemical Industry Council (pictured) . “Today’s proposal is a missed opportunity to provide a realistic pathway for industrial transformation and restore confidence in Europe as a place to invest and produce.”
According to the federation, positive elements such as the flatter reduction trajectory and the possibility of using international carbon credits are fully offset by the stringent conditions attached to free allocation.
“By removing the carbon leakage protection companies benefitted from so far and instead imposing investment requirements coupled with additional bureaucracy, the Commission’s proposal is disconnected from the realities that industry is facing on the ground: no business case nor enabling conditions.”
Cefic is calling for the pace of ETS cost increases to be aligned with the delivery of the enabling conditions it considers necessary for industrial transformation. Otherwise, it argues, the transition will remain out of reach for a large part of the industry.
“Companies should not be forced to make investment commitments in exchange for regulatory support when the conditions required to deliver those investments are not in place. Effective protection against carbon leakage will remain essential as long as carbon costs in Europe exceed those faced by international competitors.”
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