The European Commission has published a proposal to revise the EU Emissions Trading System (EU ETS) for the period 2031–2040 (Phase V), launching what is likely to become one of the most politically significant climate reforms of the current legislative cycle. The proposal, part of the broader package implementing the EU's recently adopted 2040 climate target of a 90% net greenhouse gas emissions reduction compared to 1990 levels, reflects a notable shift in the Commission's approach: while preserving the EU ETS as the cornerstone of European climate policy, the proposal places substantially greater emphasis on industrial competitiveness, affordability and investment predictability than previous reforms.

The proposal, published on 17 July 2026, arrives against a backdrop of sustained concern from European industry regarding energy costs, the pace of decarbonisation obligations, increasing global competition (particularly from jurisdictions with less stringent carbon constraints) and the need to support innovative low-carbon technologies.

For businesses operating in EU ETS-covered sectors, the proposal is important not because it changes the direction of travel, but because it may significantly alter the pace, cost profile and financing environment of the transition during the 2030s.

Download PDF
239kb