Our climate hopes hinge on ETS 2; attack it at our peril
With the EU's 2040 climate target now on the table, policymakers face a fundamental question: Can Europe deliver on its ambition? The answer does not lie in adjusting a few percentage points of a CO₂ reduction target, but in preserving the core instrument that drives emissions cuts – the new Emissions Trading System for buildings and transport, ETS 2, which covers sectors responsible for more than 40% of EU emissions.
Carbon pricing is indispensable for reaching Europe's climate goals. It aligns decarbonisation with innovation, cost efficiency, and investment certainty – without adding bureaucratic complexity. This approach has already proven effective under ETS 1: while heavily subsidised and fragmented policies in buildings and transport have reduced emissions by only 17.6% since 2005, ETS 1 sectors have cut nearly 50%. Europe cannot afford to abandon this market-based logic in its climate policy; it must expand it to all sectors.
But before it even begins, ETS 2 is under attack. Though agreed by co-legislators and slated to launch in 2027, a group of 18 member states is now calling for softer implementation, including major changes to the Market Stability Reserve (MSR). Some, like the Czech Republic and Estonia, are demanding a delay or even an opt-out. Poland has gone further, questioning ETS 2 entirely – and with it, the entire European Green Deal.
Let's be clear: weakening ETS 2 would be a political mistake and a strategic failure. There is no credible Plan B. The integration of ETS 2, alongside the Carbon Border Adjustment Mechanism (CBAM), would strengthen European leadership in climate action, technology, and innovation and help spur the adoption of carbon pricing worldwide .
Cancelling or postponing ETS2 due to political pressure would set a dangerous precedent. It would open the floodgates to weaken also ETS 1, undermine investor confidence, and damage the credibility of EU climate policy at home and abroad. It would cast doubt on ongoing investment and innovation waves across sectors. That's why we must defend ETS 2 and ensure it is ready for implementation across all member states.
Resistance to ETS 2 is driven by understandable fears about social equity and price spikes. Households – especially those with low to middle incomes and in rural areas – may face higher heating and mobility costs without already accessible green alternatives. But the right response is not delay – it is pragmatic delivery. And that means unlocking early support where it's needed most.
The EU can frontload a share of ETS2's expected revenues. Member states could advance up to €50 billion in future auction proceeds from 2033 to 2035 to fund clean mobility, energy-efficient buildings, and direct support for vulnerable households – starting immediately.
In addition, a targeted MSR reform, extending its operation beyond 2030, can help maintain price stability, which is critical to sustaining climate ambition, protecting investor trust, and avoiding politically motivated interventions.
This strategy enables a 'soft landing' for ETS 2 by combining the efficiency of carbon pricing with timely social support, and accelerating the deployment of infrastructure and technologies. It avoids steep price shocks in the short to medium term without distorting market signals.
Now, as most member states have missed the deadline to submit their Social Climate Plans, it is increasingly clear that the problem is not ETS 2, it's a lack of preparation.
Delaying action will not make decarbonisation fairer or more affordable. It will only raise the long-term cost for citizens and further erode the EU's climate, economic, and social credibility. If we are serious about our climate targets, it is high time to defend Europe's market-based climate policy – not to undermine it.
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