Reform of the EU ETS 1 and accompanying instruments: A policy mix for the decarbonisation of industry
The reforms to the European Union’s Emissions Trading System (EU ETS 1) for the energy sector, energy-intensive industries, and aviation and maritime transport, due to take place in 2026, must address two key aspects in particular. The provisions of the EU ETS 1 must be adapted to the new framework set by the legally-binding climate targets for 2040 and 2050. As a central pillar of the EU’s climate policy, the EU ETS 1 is of particular importance in this context.
Furthermore, the reform of the EU ETS 1 must strike a new balance between climate protection and industrial competitiveness and the capacity for transformation. The EU ETS 1 should achieve emissions reductions primarily through investment in climate-neutral technologies rather than through the relocation of production. It should be borne in mind that transformation profiles and rates may vary between sectors and companies. Investments that have already been made require planning certainty. In other areas, infrastructural, regulatory and economic conditions must first be established. During transitional phases, the co-existence of conventional and transformative production processes – which is closely linked to industry modernisation cycles – must also be taken into account.
This study was carried out by the Oeko-Institut e.V. in collaboration with the Institut der Deutschen Wirtschaft e.V. and was funded by the Climate Neutrality Foundation.