The European Commission is proposing to abolish the emissions-coupon system.

The European Commission has proposed reforms to the EU Emissions Trading System (ETS), aiming to increase investments in decarbonization within industries, including through the allocation of free emission allowances. The proposal was announced on July 17, 2026, with support from Slovenia’s state-owned energy company, GZS. The reform seeks to align the system more effectively with long-term climate goals while maintaining economic competitiveness. The EU ETS, established in 2005, operates by setting a cap on total emissions from energy-intensive sectors such as power generation, industry, and later aviation and shipping. Companies receive emission allowances, which they can trade. Over time, the number of allowances has been gradually reduced, leading to a decline in emissions by approximately 50% since the system's inception. According to Commissioner for Climate Action Wopke Hoekstra, the ETS has already contributed significantly to reducing greenhouse gas emissions in the EU, generating around €270 billion in revenues since 2013, much of which has been reinvested into innovation and decarbonization projects. However, the current system has faced criticism for its uneven distribution of financial benefits. Hoekstra noted that member states receiving 80% of all revenue have invested less than 10% of these funds into decarbonizing their respective industries. In response, the Commission proposes that future allocations should require member states to dedicate at least 50% of the proceeds from auctioning allowances toward investments aimed at reducing carbon footprints within participating sectors. To further incentivize decarbonization efforts, the Commission suggests introducing free emission allowances, which would be available until 2038 instead of the previously planned 2034. These free allowances will be distributed based on the implementation of investment plans in Europe’s decarbonization initiatives. Specifically, 80% of the free allowances will be allocated following the publication of national investment plans, while the remaining 20% will be given after the completion and reporting of these investments along with associated reductions in emissions. In addition to adjusting the allocation mechanism, the Commission aims to establish an Industrial Decarbonization Bank by 2031, offering 400 million emission allowances. This fund will support investments in clean technologies during the period from 2027 to 2030. The goal is to secure an additional €100 billion in investments over the coming decade. The reform also includes adjustments to the linear reduction factor, which dictates how quickly the total number of emission allowances decreases. The new approach would slow down the rate of reduction, thereby easing pressure on industries while still working towards the EU’s target of achieving an 90% reduction in greenhouse gas emissions by 2040 compared to 1990 levels. A revised assessment of the reduction rates is scheduled for 2033. The proposal also addresses mechanisms for fairer burden sharing among member states and provides financial support to countries most affected by the transition. Slovenia, according to unofficial data, will continue to receive 10% of all proceeds from the ETS, although it will no longer qualify for funds from the Modernization Fund due to improved development after 2030. Hoekstra emphasized that the reform combines ambitious climate action with competitiveness, opening doors for a renewed industrialization of Europe and genuinely contributing to energy independence. The European Commission has officially presented the proposal for changes to the ETS.