What will the future of the EU Emissions Trading System (ETS) look like as the emissions cap heads towards zero? Is integrating carbon dioxide removals (CDRs) into the ETS a solution to help the EU achieve its climate goals? Or would they compromise the integrity and functioning of the system? These questions are at the forefront of the Commission’s mind as they review different options for the future of the ETS ahead of the 2026 revision.

The current carbon emissions reporting in the CBAM fails to achieve its goal of replacing free allocations under the EU ETS and undermines its integrity. A systematic default value system would improve the CBAM and safeguard the EU ETS.

We took part in a targeted survey run by the European Commission’s DG TAXUD on methodologies used to calculate embedded emissions and the rules for adjusting CBAM obligations alongside free allocation under the ETS. Our proposal: free allocation should be reformed to close the ‘DRI loophole’.

For ‘low carbon’ hydrogen to truly make a positive contribution to Europe’s transition to climate neutrality, the safeguards put in place must be meaningful. Unfortunately, this does not appear to be the case in this draft delegated act.

Electrification and flexibility are critical to decarbonising both industrial and electricity systems. But what happens when we combine the two? Industrial flexibility will play an increasingly important role as industry moves towards electrification.

This brief analyses 2023 emissions under the EU Emissions Trading System (EU ETS), using the latest data available from the EU Transaction Log (EUTL) . It particularly focuses on the iron and steel sector.