European Commission proposes reforms to the EU emissions trading system and electrification plan

The European Commission has introduced a package to reform the EU Emissions Trading System (EU ETS) alongside a new electrification action plan. Key proposals include reducing the annual MSR intake rate from 24% to 12% for the 2031-2040 period and reducing mechanism activation thresholds by 4% annually from 2029. To support industrial decarbonization, the Commission proposes a new €30 billion funding instrument and the usage of up to 250 million tons of permanent carbon removals to meet compliance obligations. The reform aims to prevent market tightness and price spikes that threaten European industrial competitiveness. Furthermore, the Commission proposed ending the automatic cancellation of surplus emission allowances exceeding 400 million, keeping them within the reserve instead. The electrification plan aims to raise the share of electricity in final energy consumption to an indicative target of 46% by 2040. This shift is intended to reduce fossil fuel imports by approximately €260 billion annually, given that current electrification remains stagnant at 23%. Additional measures include reducing grid fees and tax burdens for energy-intensive enterprises.