EU proposes slowing down cuts to carbon emissions for businesses

BBC World NewsUpdated Jul 17, 2026, 6:34 PM

Under the proposals, the EU plans to relax its emissions trading system to give companies more time to reduce their carbon output.

The European Union has unveiled proposals that would slow cuts to businesses' greenhouse gas emissions limits, as part of a major climate policy overhaul.

The reforms would relax the rules of the bloc's emissions trading system (ETS) to give businesses more time to reduce their carbon output than previously planned.

The changes would mean some industries could obtain emission allowances until 2038 instead of 2034, if they commit to investing in decarbonisation efforts.

The proposals still need to be approved by EU countries and lawmakers - a process that could take a year.

"We are adopting a more business-friendly and, may I say so, savvy approach," said EU climate commissioner Wopke Hoekstra.

The European Commission, which develops legislation for the EU's 27 member states, said the changes would ensure the ETS was aligned with the EU's goal to reduce carbon emissions by 90% by 2040, compared with 1990 levels.

The ETS, which was introduced in 2005, is the EU's main tool for curbing greenhouse gases.

But it has come under criticism from a number of member states, with Italy in particular condemning the trading scheme as a de facto tax that has helped keep energy prices artificially high.

Under the ETS, Europe's industries and power plants are required to buy a permit, or allowance, for every tonne of carbon dioxide they emit, creating a financial incentive to invest in cleaner technologies.

Companies can buy extra permits or trade them. Some businesses are given permits for free to help them compete with foreign firms that do not pay carbon costs.

The ETS also caps the number of permits released each year to make sure missions decrease.

The Commission has proposed slowing the rate at which this cap is lowered each year to around 3.7% from 2031 and then to 1.7% from 2036 - down from 4.3% currently.

As part of the changes, the EU also proposes continuing free permits until 2038, rather than ending them in 2034, when they were to be replaced by a carbon border charge on imports for some sectors.

The Commission would also offer 80% of free permits up front to companies with plans to invest in decarbonisation in Europe. Businesses would get the remaining 20% once those investments are made.

Responding to the proposals, Polish climate minister Paulina Hennig-Kloska said Poland would push to weaken the policy further.

"For the first time, we are seeing a softening of the stance rather than a toughening of it - this is a huge success for Poland. Although we will fight for more," she said.

But Green politicians were less impressed. A German member of the European Parliament, Michael Bloss, said the plans would result in "gigantic climate pollution" and the next generation would have a worse quality of life as a result.

Global temperatures have been rising over the past century due to human activities that release greenhouse gases emissions, but local or regional geography shapes the speed at which different places are warming.

As Europe is warming particularly quickly, it is being more exposed to frequent and stronger spells of extreme heat.