The European Council has invited the Commission to present a review of the emissions trading system (ETS) by July 2026 at the latest.

Documented amongst a comprehensive suite of draft conclusions reached by the Council at its meeting on 19 March, the review is described as being necessary “to reduce the volatility of the carbon price and mitigate its impact on electricity prices, including related supply chain costs, and on diversion of activities, while preserving the essential role of the ETS in the climate and energy transition through a market-based price signal for carbon emissions that drives investment and innovation”.

During the week leading up to the European Council meeting, Kate Abnett of Reuters reported that Spain, the Netherlands and six other governments had urged the European Union “not to dismantle or suspend the bloc’s emissions trading system, its main climate change policy, as Brussels hunts for ‌ways to curb energy prices.”

With energy prices surging due to disruptions in gas flows from the Middle East, the European Union has come under pressure from Italy and other European countries to weaken or suspend the Emissions Trading System. In her article, Ms Abnett quotes from a document submitted to the EU by Spain, the Netherlands, Denmark, Finland, Luxembourg, Portugal, Slovenia and Sweden, in which the writers state that significantly altering or suspending the ETS ⁠instrument would “constitute a very worrying step backwards, and “dramatically penalise early movers who have already invested and innovated in decarbonisation”.

Ms Abnett points out that while the cost of ETS represents around 11% of electricity bills in Europe, the figure is higher for countries like Poland due to the dominant role of coal power plants in the power mix.

See also Ten EU members press Brussels to keep giving industry free carbon permits (Reuters)