Background
The Commission is updating the EU Emissions Trading Directive to meet the EU’s future emission reduction targets. To support the impact assessment, it has launched a consultation covering a wide range of topics in considerable detail. The Commission will present its proposal for the review in Q3 2026. Below is a summary of CLC’s responses.
Key takeaways
- The EU ETS has been a success story, achieving a 50% emission reduction since 2005 in the sectors it covers.
- Climate Leadership Coalition strongly supports the continued improvement of the ETS, as well as the inclusion of new sectors under the system.
- The most important areas for further development include:
- Closer integration of carbon removals into the ETS and broader climate policies
- Strategic use of EU ETS revenues to accelerate industrial decarbonization and the transition of the energy system
- Exploring the potential for linking the EU ETS with other emissions trading systems
- However, a key challenge remains: the limited impact if climate action is confined to Europe. This is why linking the EU ETS with global carbon pricing initiatives—and including such proposals in the EU’s climate and energy vision to be presented in Belém—is crucial.
CLC’s comments in short
Carbon removals:
- Key question by European Commission: Should domestic permanent carbon removals be integrated in the EU ETS?
- CLC’s main message: Permanent carbon removals should be integrated into the EU ETS. This integration could create a win–win outcome: it would help ensure the EU ETS remains a liquid and robust system, while simultaneously generating demand and incentives for the further development and deployment of carbon removal solutions.
Use of EU ETS auction revenues:
- Key question by EC: The sale of allowances in the EU ETS auctions raises a substantial revenue to support climate action and energy transformation, 43.6 billion EUR in 2023. What should be the most important uses of ETS auction revenues in the future?
- CLC’s main message: ETS auction revenues should be used to support breakthrough technologies and electrification. Most important uses in the future: decarbonisation of industrial installations, development of a clean energy system and development and upscaling of innovative clean technologies.
Linking EU ETS with other carbon markets:
- Key question by EC: Should the EU pursue linking opportunities with other carbon markets and if so, what would be the main motivations for the EU to do so?
- CLC’s main message: The EU ETS should be linked with other carbon markets to improve cost-effectiveness of the emissions reduction and to support liquidity. In terms of key parameters such as the level of ambition, the emissions cap, and the scope, the systems should be aligned to ensure the efficiency benefits of linking can be achieved. Linking must not result in a weakening of the EU’s level of ambition.
Carbon leakage measures for sectors not covered by CBAM:
- Key question by EC: CBAM will be fully implemented by 2034. For sectors not covered by CBAM, it may become necessary to consider other carbon leakage measures, free allocation of EUAs or compensating indirect carbon costs. On what grounds could they be allocated?
- CLC’s main message: Free allocation and of allowances compensating indirect carbon costs should be conditional on taking steps towards carbon neutrality. Possible additional system for compensating indirect carbon costs should be harmonised at EU-level.
EU maritime ETS rules:
- Key question by EC: How to avoid possible double burden with IMO’s carbon pricing mechanims.
- CLC’s main message: The EU’s maritime ETS should form a clear and consistent framework—administratively, economically, and in terms of emission reductions—together with the IMO’s1 upcoming carbon pricing mechanism and other EU maritime regulations (especially the FuelEU Maritime Regulation), while avoiding overlapping regulation.
Geographical coverage of aviation EUETS:
- Key question by EC: Currently the EU ETS do not cover departing and arriving flights other than those within the EEA, to Switzerland or the UK. Should the scope of the system also be extended to include departing and arriving flights outside the EEA?
- CLC’s main message: Emission reductions in the aviation sector remain insufficient, so we support extending the current scope of regulation through an international solution, similar to the approach taken in the maritime sector. Relying solely on an EU-only solution for international flights carries a significant risk of competitive disadvantage, and the climate benefits of unilateral measures are not always clear or guaranteed.
Municipal waste incineration (MWI) and the EU ETS:
- Key question by EC: Should the MWI installations and landfilling in the EU ETS from 2028.
- CLC’s main message: MWI installations and landfilling should be fully included in the EU ETS through an EU-wide approach. This would create incentives to reduce emissions in the sector, enable the use of biogenic CO₂ from combustion in various BECCS and BECCU solutions, and support the implementation of a circular economy.
More Information: Juha Turkki, Development Director, juha.turkki@clc.fi
