EU Commission proposes ETS reform with longer free permits

Energy-intensive industries would keep free CO2 allowances until 2038 instead of 2034; the annual reduction of the allowance cap slows to 3.7% (2031–2035) and 1.7% (2036–2040), and an Industrial Decarbonisation Bank is planned from 2028. The Electrification Action Plan presented in parallel sets an indicative target of a 46% electricity share in final energy consumption by 2040 (roughly double today's share).

Proposal for ETS phase 5 (2031–2040) dated 17 July 2026; the relaxations are meant to reconcile the 90% 2040 climate target with industrial competitiveness. Reactions range from industry approval to criticism from climate groups.