The EU ETS at a Crossroads

The European Commission has been running a public consultation and call for evidence on the design of the EU ETS and the Innovation Fund. Both are open until 8 July 2025. Questions include the treatment of aviation, shipping, indirect cost compensation, the CBAM, extension to municipal waste, carbon removals and carbon utilisation. 
 

Our main messages: 

• Simplify the EU ETS by phasing out free allocation

• Aviation: put a seat belt on EUA supply

• Free allocation: switch from process to products

• Link indirect cost compensation to carbon-free electricity only

• Reform the Innovation Fund to:
  – Better assess the carbon footprint of electricity use
  – Reserve grants to technology risk
  – Reserve scale-up subsidies to poorly capitalised sectors

• Market Stability Reserve: reduce the reinjection rate as well as thresholds

• Keep carbon removals out of the ETS

• Do not shift CCU carbon accounting down value chains

• Limit linking with other ETS

Read our responses on the European Commission’s website: 

–On the EU ETS

–On the Innovation Fund