EU proposes major overhaul of emissions trading to aid European industry

In a new policy package, the European Commission seeks to adjust the EU Emissions Trading System to better align with the needs of European manufacturers. The proposal lengthens the supply of free emission permits, pushing the depletion date from 2039 to 2048, acknowledging that many sectors lack ready-made carbon-free solutions. It also extends the existing CO2 compensation mechanism that mitigates the impact of higher power costs caused by carbon pricing.

However, the draft ties the allocation of free permits to demonstrable climate-related investments, a move critics argue could deter firms from taking the grants. The commission argues that these steps are essential to preserve industrial competitiveness, prevent carbon leakage, and reinforce the bloc’s strategic autonomy. Norway, as a major industrial nation within the EU market, is highlighted as a key stakeholder that should support the main elements while using national policy space to aid its own firms.