Written by Nicolas d’Hanis
Dear reader,
Brussels is currently balancing summer heat with an equally intense policy agenda. As attention sharpens on the upcoming ETS reform, which continues to generate significant debate, we have taken a closer look at what a reform entails and its potential implications for Europe’s climate and energy framework. Alongside this, we update you on the European Competitiveness Fund and the Industrial Accelerator Act. Enjoy the read!
The spotlight
What to expect from the upcoming EU ETS revision?
The European Commission is preparing for a highly anticipated revision of the Emissions Trading System (ETS) on 15 July 2026. While the system has historically focused on driving emission reductions, discussions are increasingly centred on how the framework can protect European industrial competitiveness. There is a broad consensus within the Commission that the ETS remains an essential tool to decarbonise industry, but deep internal debates persist around free allowance flexibility, the new benchmark updates published in May, and the strategic reuse of carbon revenues for industrial decarbonisation.
Keen to know more? Let’s find out below.
How will revenues be channelled back into the industry?
The Commission plans to heavily reinvest carbon revenues into European businesses to support hard-to-abate sectors and clean innovation, though disagreements remain over how strictly these funds should be ring-fenced. Commission President von der Leyen has urged Member States to mirror EU-level efforts by fully reinvesting their national ETS revenues into industrial decarbonisation, rather than diverting them to other budgetary needs.
Commissioner Hoekstra strongly supports this approach, arguing that systemic flexibility must be tied to mandatory investments within Europe. Meanwhile Tzitzikostas, the transport Commissioner, is pushing for a sectoral earmarking model, suggesting that revenues generated by a specific sector should flow directly back into it.
What mechanisms will protect energy-intensive sectors?
European leaders are designing targeted mechanisms to ensure a level playing field for energy-intensive industries facing fierce international competition. Von der Leyen is actively promoting the “ETS Investment Booster.” She has also called for a more realistic trajectory for free allocation rules after 2034. A joint internal orientation note from Hoekstra and Green Deal chief Teresa Ribera supposedly reinforces this direction, advocating for explicit backing of industrial frontrunners, a predictable carbon price, and a stable market supported by adjustments to the Market Stability Reserve (MSR).
How far will the scope of the carbon market expand?
The Commission is set to propose a broader coverage for the carbon market, aiming to integrate new sectors and innovative technologies into the formal ETS framework. Commissioner Hoekstra called for a targeted debate on extending the system’s scope to include sectors like waste, international carbon credits, and negative emissions, stated clear conditions are met. Both Hoekstra and Ribera see this expanded coverage as a vital investment engine for the green transition. While there are ongoing discussions regarding the role of international credits and the integration of carbon removal technologies, Ribera has strongly rejected any temporary suspension of the ETS.
What do businesses think about the upcoming reform?
Industry is worried about the ETS and the impact it will have on their ability to do business in Europe due to the existing high energy costs. A coalition of 39 major industrial companies, including ArcelorMittal, BASF and Thyssenkrupp, have already urged EU leaders to take immediate action against rising carbon market costs, warning that financial pressures are eroding competitiveness while vital decarbonisation infrastructure remains unavailable. The signatories called for a recalibration of free allowance benchmarks, the reallocation of ETS revenues into industrial transformation, and rejected proposed conditionalities for receiving permits to prevent job losses and investment drops.
What’s next?
The formal publication of the ETS revision proposal on 15 July 2026 will trigger intense negotiations between the European Parliament and the Council. For businesses, the upcoming shifts in benchmark updates, sectoral funding pools, and free allocation timelines will fundamentally reshape the financial realities of industrial operations in Europe.
Publyon is following every step of the drafting process and the shifting dynamics between the Commissioners. Want to know more? Stay tuned for our upcoming blog post on the ETS reform or reach out to us!
Impact analysis for your business
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- Custom insights on how upcoming policy changes might impact your business;
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Policy updates
Commission approves national implementation data for free EU ETS allocations
On 17 June the European Commission published a decision approving the national implementation measures submitted by Member States, verifying the data used to identify industrial installations and calculate their free carbon allowances. This formal approval follows a recent agreement with EU governments establishing the benchmark values for free permit allocations during the 2026 to 2030 trading period. Alongside this data clearance, the EU executive has committed to proposing critical revisions to the two most contested fallback benchmarks, a development scheduled to be unveiled as part of a broader EU ETS reform package on 15 July.
Member states adopt partial general approach on European Competitiveness Fund
On 16 June, EU ministers adopted a partial General Approach on the new European Competitiveness Fund (ECF) during a General Affairs Council meeting, endorsing a compromise text shaped by the Cypriot Council Presidency. While the text lacks final budget figures – as the leaders of the Members States continue to hotly debate them – the partial General Approach advances the legislative process to allow interinstitutional negotiations once the European Parliament establishes its position. The Member States continue to differ in the opinion on how nuclear energy will be incorporated into the ECF – which will be the major fund for the clean transition and industrial decarbonisation in the next budget.
Commission proposes freezing Russian oil price cap amid global price surge
On 9 June, the European Commission has proposed freezing its dynamic Russian oil price cap mechanism until January 2027 to shield the market from severe energy shocks following the closure of the Strait of Hormuz. Commission President Von der Leyen noted that the existing cap, which restricts Urals crude to 15% below average market rates, was not designed to withstand the volatile fossil fuel price spikes triggered by the war involving Iran. The proposal forms part of a draft 21st sanctions package against Russia, which introduces 170 new listings alongside targeted bans on liquefied natural gas tanker sales and restrictions for ports, refineries, and bunkering services aiding Russia’s shadow fleet. The draft text, which also targets the Russian financial, defence, and fisheries sectors, now heads to the Council, where it will require unanimous approval from member states to take effect.
Member States debate the Industrial Accelerator Act
On 28 May, EU ministers held a debate on the Industrial Accelerator Act (IAA). A broad majority expressed support for the IAA’s Made in Europe requirements, but several Member States (most notably the Netherlands, Sweden, Denmark, Lithuania, Malta) noted that differing decarbonisation requirements could fragment the market and increase administrative burdens, especially in public procurement and permitting.
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