What are the three main components of the EU ETS reform proposed on July 17, and how do they aim to support industrial decarbonization?

The EU ETS reform comprises: (1) a reduced linear reduction factor—lowered to 3.7% for 2031–2035 and 1.7% for 2036–2040 (down from 4.3%), providing industry with 'breathing space' while maintaining the 2040 target of 90% emissions reduction and ensuring post-2040 allowance availability; (2) the creation of an Industrial Decarbonisation Bank with €100 billion, including €30 billion available before 2030, and a requirement that Member States allocate 50% of national ETS revenues to ETS-covered industries, aiming to boost over €100 billion in investment by 2030; and (3) the extension of free allowances beyond 2030, conditional on operators committing to invest an amount equal to the value of those allowances in EU-based decarbonisation plans, alongside a halving of the Market Stability Reserve absorption rate (from 24% to 12%) to improve market liquidity.

Why does Cefic criticize the EU ETS reform, and what specific structural barriers does it say remain unaddressed?

Cefic criticizes the reform for failing to address short- and medium-term rising CO₂ costs and for not tackling the 'deep-rooted obstacles' to industrial transformation. It argues that essential enabling conditions—affordable energy, sufficient infrastructure, scalable technologies, and markets for low-carbon products—are still missing; without them, additional ETS costs risk undermining competitiveness rather than driving decarbonisation investment. Cefic highlights alarming trends: a 10% loss of European chemical production capacity and an 86% drop in chemical sector investment over the past year, warning that SMEs face existential pressure and that Europe is nearing a tipping point where lost capacity, broken value chains, and abandoned investments become irreversible—ultimately jeopardising climate goals.

EU ETS Reform Sparks Industry Controversy

Jul 21, 2026

The EU proposed major ETS reforms including adjusted emission reduction rates and a €100 billion decarbonization fund. While Solvay views the direction positively, Cefic warns the plan fails to address deep industrial transformation barriers and rising carbon costs.

ccin

2026-07-21

EU ETS Reform Sparks Industry Controversy

EU ETS Reform Sparks Industry Controversy

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