Keeping the signal: building Europe’s industrial investment case

The report published by Strategic Perspectives in collaboration with Veyt and Oeko-Institut, examines how the European Commission’s proposed reform of the EU Emissions Trading System (EU ETS) could affect industrial investment, decarbonisation and European competitiveness.

Based on modelling by Veyt, the analysis finds that the proposed reform could reduce investment in industrial decarbonisation technologies by €90 billion between 2026 and 2040 compared with current legislation. Low-carbon steel, green hydrogen and carbon capture technologies would be particularly affected. Additional calculations by Oeko-Institut indicate that weakening the ETS could increase emissions by more than 200 million tonnes of CO₂ in 2040 compared with earlier cost-efficient pathways, shifting the burden of emission reductions to sectors where mitigation is more difficult and costly, particularly agriculture.

The report highlights the importance of a predictable carbon price signal for industrial investment, energy security and long-term competitiveness. It recommends maintaining strong decarbonisation incentives, using ETS revenues more effectively to support electrification and clean industrial technologies, and establishing credible pathways for phasing out fossil fuels.