Von der Leyen rewrites the heart of the Green Deal in the name of "competitiveness".

The European Commission has unveiled a major overhaul of its flagship climate policy, the Emission Trading System (Ets), underlining a shift toward economic competitiveness while maintaining the goal of reducing emissions by 90% by 2040. The reform, announced by President Ursula von der Leyen, introduces changes that critics argue weaken the system’s effectiveness, particularly in light of rising global temperatures and growing pressure from industry sectors. Environmental groups have expressed concern, warning that the revised rules could lead to an additional two billion tonnes of CO₂ emissions over time. The proposed changes include extending the period during which certain industries can receive free allowances, known as "free permits," to avoid the risk of "carbon leakage", the potential relocation of production to countries with less stringent environmental regulations. This adjustment aims to protect European manufacturers from unfair competition, especially against producers in regions with lower emissions standards. The new framework also delays the implementation of the Carbon Border Adjustment Mechanism (Cbam), which imposes tariffs on imports based on their carbon content, until 2038. These modifications reflect a compromise between industrial interests and environmental goals, though they have drawn sharp criticism from climate advocates. Under the current Ets, companies must surrender annual allowances equal to their CO₂ emissions. Those that emit less than allowed can sell unused permits, while those exceeding limits must purchase more. Over the past two decades, this system has contributed to a more than 50% reduction in emissions from covered sectors such as power generation, heavy industry, aviation, and maritime transport. Revenue generated through auctioning these permits has also provided member states with billions of euros to fund green investments. However, the gradual rise in carbon prices has sparked complaints from energy-intensive industries, which claim the costs undermine their international competitiveness. In response to these concerns, the European Commission has pledged up to 100 billion euros to support decarbonization efforts, framing the reform as a strategic move to enhance Europe’s industrial strength. The proposal also mandates that member states allocate at least 50% of national Ets auction revenues to investments in decarbonizing sectors within the system. While analysts acknowledge the effort to strike a balance, they caution that the revised structure may reduce the price signal of carbon after 2035, potentially slowing the pace of transition during the most critical phase of climate action. Environmental organizations, including Carbon Market Watch and the World Wide Fund for Nature (Wwf), argue that the reforms will allow an extra two billion tonnes of emissions to be released into the atmosphere. They point to the timing of the announcement, following one of the hottest Junes on record in Western Europe, as evidence of a broader trend toward prioritizing economic growth over climate urgency. Meanwhile, industry representatives, including those from the steel, cement, and chemical sectors, maintain that the adjustments remain insufficient to address their operational challenges. The revised Ets proposal will now enter negotiations with the European Parliament and the Council of Ministers, where final decisions will be made. The outcome will determine whether the system continues to serve as a powerful tool for driving emissions reductions or becomes increasingly aligned with the interests of industrial players. As the debate unfolds, the balance between economic resilience and environmental ambition remains a key challenge for policymakers.