EU Proposes Slower Carbon Emission Cuts for Businesses
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- The European Commission proposed slowing the annual ETS cap-reduction rate to approximately 3.7% from 2031 and 1.7% from 2036 — down from the current 4.3% — as part of a major climate policy overhaul.
- The reforms would allow some industries to obtain emission allowances until 2038 instead of 2034, conditional on companies committing to investing in decarbonisation.
- The EU also proposes continuing free emission permits until 2038 rather than ending them in 2034, when they were to be replaced by a carbon border charge on imports for some sectors.
- The Commission would front-load 80% of free permits to companies with decarbonisation investment plans in Europe, with the remaining 20% released after investments are made.
- EU climate commissioner Wopke Hoekstra called the changes a "more business-friendly and savvy approach," while insisting the ETS remains aligned with the bloc's goal to cut emissions 90% by 2040 versus 1990 levels.
- Italy has condemned the ETS as a de facto tax keeping energy prices artificially high, and Poland's climate minister Paulina Hennig-Kloska called the softening "a huge success for Poland" while pledging to push for further weakening.
- German Green MEP Michael Bloss warned the plans would produce "gigantic climate pollution," underscoring a sharp partisan divide as the proposals head to EU countries and lawmakers — a process that could take a year.
Why it matters: The Commission's pivot extends free carbon allowances by four years (to 2038) and lowers the annual cap-reduction rate from 4.3% to as low as 1.7%, giving energy-intensive industries like steel and cement breathing room. Italy, Poland, and other member states had lobbied for precisely this relief, while Greens argue the delay directly undermines the EU's 90%-by-2040 climate target — a fight that now moves to EU capitals and the Parliament over the coming year.
