The European Commission, led by Ursula von der Leyen, is set to introduce targeted adjustments to the EU Emissions Trading System (ETS) “within days,” signaling urgency amid rising pressure from industry and member states. The proposed measures include updates to free allocation benchmarks, increased flexibility for manufacturers, and a strengthened Market Stability Reserve to curb price volatility. Alongside these tweaks, the Commission plans a €30 billion ETS-funded investment facility to accelerate clean technology deployment, while also exploring complementary tools such as energy cost relief and more flexible state aid. Despite mounting calls for reform, the Commission is positioning these changes as targeted fixes rather than a structural overhaul, reaffirming the ETS as a central and “proven” pillar of EU decarbonisation policy.

The debate highlights growing divisions across Europe. Ten EU countries warn that the ETS poses a serious risk to industrial competitiveness under current economic conditions, calling for extended free allowances, a slower phase-out, and measures to stabilise carbon prices and reduce electricity costs. In contrast, over 100 companies (including IKEA, Unilever, and Volvo Group) argue that weakening the carbon market would be a mistake. They stress that high energy prices and structural inefficiencies, rather than carbon pricing itself, are the main challenges, and call for stronger investment in electrification, grids, and clean technologies. The Commission’s approach reflects this balancing act: maintaining a robust carbon price to support long-term competitiveness, while addressing short-term economic pressures through targeted intervention.