The European Commission plans to overhaul its Emissions Trading System (ETS) on July 17 to balance climate targets with economic interests. Under the drafted proposal, the bloc intends to extend carbon allowances into the 2040s, reversing a current framework that effectively terminates emissions by 2039.

To prevent domestic companies from relocating, Brussels plans to grant an extra EUR 6 billion in free carbon permits. These benefits will apply to heat producers, fuel users, and businesses covered under the carbon border tax past its original 2034 expiration date.

In addition, the proposal recommends slowing down the mandatory annual 4.3% emissions drop by lowering the linear reduction factor. In return, member states must utilize revenue collections to fund local green technologies, international carbon offset projects, and cleaner energy transitions.