EU Proposes Slowing Carbon Emission Cuts for Businesses in Major Climate Policy Shift

EU Emissions Trading System Faces Major Revision

The European Union has put forward proposals that would slow the pace of greenhouse gas emission reductions for businesses, marking a significant shift in the bloc's climate policy approach. The reforms would ease constraints within the EU's emissions trading system (ETS), granting companies additional time to lower their carbon output beyond what was originally planned.

Under the proposed changes, certain industries would be able to obtain emission allowances until 2038 rather than the previously set deadline of 2034, provided they commit to investing in decarbonisation efforts. The European Commission, which drafts legislation for the EU's 27 member states, stated that the adjustments would ensure the ETS remains aligned with the bloc's broader objective of cutting carbon emissions by 90% by 2040 compared with 1990 levels.

The proposals must still be approved by EU member states and lawmakers — a process that could take up to a year to complete.

A More Business-Friendly Approach to Decarbonisation

EU climate commissioner Wopke Hoekstra defended the revised approach, describing it as more accommodating to industry needs. "We are adopting a more business-friendly and, may I say so, savvy approach," he said.

The ETS, which was launched in 2005, serves as the EU's primary mechanism for reducing greenhouse gases. The system requires Europe's industries and power plants to purchase a permit, known as an allowance, for every tonne of carbon dioxide they emit, thereby creating a financial incentive to invest in cleaner technologies. Companies can also buy additional permits or trade them with others.

Some businesses currently receive permits at no cost to help them remain competitive against foreign firms that do not face carbon costs. The ETS also places a cap on the total number of permits released each year to ensure that overall emissions decline over time.

The Commission has proposed reducing the rate at which this annual cap is lowered. Under the new plan, the reduction rate would drop to approximately 3.7% from 2031 and then to 1.7% from 2036, compared with the current rate of 4.3%.

Free Permits Extended Amid Industry Pressure

As part of the overhaul, the EU has also proposed extending the distribution of free permits until 2038. These were originally scheduled to end in 2034, when they were to be replaced by a carbon border charge on imports for certain sectors.

Additionally, the Commission would offer 80% of free permits in advance to companies that present plans to invest in decarbonisation within Europe. The remaining 20% would be distributed once those investments have been carried out.

The ETS has faced criticism from several member states. Italy has been particularly vocal, condemning the trading scheme as a de facto tax that has contributed to keeping energy prices artificially high.

Divided Reactions From Member States and Lawmakers

The proposals have drawn mixed reactions across the EU. Polish climate minister Paulina Hennig-Kloska indicated that Poland would seek to further weaken the policy, while acknowledging the shift as a partial victory.

"For the first time, we are seeing a softening of the stance rather than a toughening of it — this is a huge success for Poland. Although we will fight for more," she said.

Green politicians, however, expressed strong opposition. Michael Bloss, a German member of the European Parliament, warned that the plans would lead to "gigantic climate pollution" and that future generations would suffer a diminished quality of life as a consequence.

The policy debate comes against a backdrop of accelerating climate impacts. Global temperatures have been rising over the past century due to human activities that release greenhouse gases, though local and regional geography influences the pace of warming in different areas.

Europe is warming at a particularly rapid rate, leaving the continent more exposed to frequent and intense spells of extreme heat. This year, more than a dozen countries across western, central and eastern Europe broke their June temperature records, with nations including Hungary, the Czech Republic and Germany experiencing temperatures exceeding 40°C.

As the EU navigates the competing demands of economic competitiveness and climate ambition, the outcome of the approval process will shape the trajectory of European climate policy for years to come. What do you think about the EU's proposed changes to its emissions trading system? Share this article and join the conversation.

Source: BBC News – World