Ahead of the European Commission’s expected publication of its review of the EU Emissions Trading System (ETS) on Friday, ECR Coordinator in the Committee on the Environment Alexandr Vondra is calling for the review to be used as an opportunity to fundamentally reform a system that is undermining Europe’s industrial competitiveness and driving up costs for businesses and citizens.

Vondra said:

“This review is a test of whether the Commission is finally prepared to recognise the geopolitical and economic reality facing European industry. The EU ETS must be suspended or reformed to support Europe’s sovereignty and competitiveness, not undermine it.

“The Commission should halt or significantly slow the phase-out of free allowances, in particular for hard-to-abate sectors. Free allocation should be maintained beyond 2030 for district heating, especially in Member States where millions of households depend on district heating networks.

“The introduction of ETS2 should also be suspended, or at least postponed, until households and small businesses have affordable alternatives.

“We call on the Commission to assess whether the current emissions reduction trajectory is economically and technologically realistic. Climate targets divorced from technological reality, infrastructure capacity and available investment are not ambition — they are fantasy.

“The current timetable assumes that CBAM provides sufficient protection against carbon leakage, but this is simply not the case, particularly for export-oriented industries and Member States with a large industrial base. The Modernisation Fund must be extended beyond 2030 and its resources should be increased. No further tightening should take place without a proper assessment of the consequences for competitiveness and carbon leakage.

“The review should also include measures to reduce excessive carbon price volatility and reform the Market Stability Reserve (MSR). The Linear Reduction Factor should be reduced by at least 2 per cent, and the MSR intake rate should urgently be reduced to 12 per cent. We insist that purely financial operators with no compliance obligations be restricted from participating in ETS auctions in order to reduce speculation.

“The Commission should also improve the system for updating industrial fallback benchmarks so that they reflect what European companies can realistically achieve.

“The maritime and aviation sectors also require urgent attention. Maritime ETS obligations should be suspended until an effective global solution is agreed within the International Maritime Organization. Otherwise, shipping activity risks being diverted to non-EU ports. Island territories must be properly protected.

“In aviation, any further tightening of the ETS must depend on whether the global carbon-offsetting scheme for international aviation delivers comparable environmental ambition and fair competition for European airlines. Europe must not impose additional costs on its own carriers while competitors elsewhere remain subject to weaker rules.

“We also strongly oppose the inclusion of waste-to-energy plants in the EU ETS, as this would increase waste-disposal costs and risk diverting waste streams towards landfill.”

Concluding, Vondra said:

“Europe’s climate policy cannot come at the expense of its industrial competitiveness or create an unsustainable financial burden. The Commission now has a final opportunity to correct course and prove that it means what it says by keeping investment, jobs and industrial production in Europe.”