The European Commission has announced that it has submitted a proposal to overhaul the EU Emissions Trading System (ETS) along with a new Electrification Action Plan aimed at accelerating industrial decarbonisation, strengthening Europe's competitiveness and making the EU the world's first "electric continent". remained at 23 percent over the past decade. It will therefore estimate an indicative electrification target of 46 percent by 2040 as part of the post-2030 Energy Union package. Achieving this target could reduce the EU's annual fossil fuel import costs by €260 billion by 2040, while improving energy security, reducing energy costs and increasing industrial competitiveness.
Commission President Ursula von der Leyen said that reducing Europe's dependence on imported fossil fuels requires accelerating the use of electricity generated from domestic clean energy sources. She added that the proposed measures aim to reduce electricity prices, adapt the EU carbon market to changing global conditions, support industrial decarbonization and strengthen Europe's energy independence.
The Commission proposes changes to the structure of the ETS
As part of the ETS review, the Commission proposed updating the linear Reduction Factor (LRF) to 3.7 percent for the period 2031-35 and 1.7 percent for the period 2031-2035 and 1.7 percent for the period 2031-2035. 2036–2040, creating a more gradual pathway to reduce emissions while remaining compliant with EU Climate Law. The proposal would also allow up to two percent of high-quality international carbon credits to be used over the 2036-40 period to support decarbonization projects abroad and provide additional flexibility as reducing domestic emissions becomes increasingly difficult.
The Commission also proposed expanding financial support for industrial decarbonization. The Industrial Decarbonization Bank will receive €100 billion to finance large-scale industrial decarbonization projects across Europe, with the ETS Investment Booster program available until 2030 as the first phase of the bank's implementation. The ETS Innovation Fund will continue to support the commercialization of innovative low-carbon technologies, and Member States will be required to commit 50 percent of their national ETS revenues to the decarbonization of sectors covered by the ETS, representing more than €100 billion of investment until 2030.
