The European Commission has officially presented a strategic proposal to revise its flagship EU Emissions Trading System (EU ETS), extending and adapting the carbon market framework to align with the bloc's binding 2040 climate target of a 90% net reduction in greenhouse gas emissions. Covering power generation, heavy industry, aviation, and maritime sectors, the updated directive sets the operational architecture for Phase 5 (2031–2040). The proposed adjustments seek to balance aggressive decarbonization goals with industrial competitiveness, featuring a revised Linear Reduction Factor (3.7% for 2031–2035 and 1.7% for 2036–2040), extended carbon leakage protections, and the gradual phase-out of free allocations through 2038.

This structural overhaul provides critical policy predictability for carbon market traders, industrial procurement managers, and global climate policy strategists. Key mechanisms include integrating domestic carbon removal units, establishing international carbon credit purchasing facilities under Article 6 of the Paris Agreement, and expanding the ETS scope to municipal waste and regional flights. Market participants and heavy industries operating in or exporting to the EU should closely monitor these regulatory developments as European lawmakers negotiate the package, which will redefine industrial compliance costs and carbon pricing dynamics across global supply chains.
Source:
https://www.idnfinancials.com/id/news/66242/uni-eropa-ubah-skema-perdagangan-emisi-karbon-hingga-2040