16. 03. 2026
AUTHOR: Linda Kalcher
Europe’s industrial backbone — chemicals, steel, cement, and other energy-intensive sectors — is already facing existential uncertainties arising from challenging geopolitics, tariffs, uncertain demand for clean products, and intensifying Chinese competition. The recent escalation of conflict in the Middle East has also pushed energy prices higher, adding even more pressure. This coincides with politicians and business representatives suggesting weakening or temporarily suspending the EU’s Emissions Trading System (ETS), which would cause the carbon price to drop and hit shares of European companies.
In response, companies have publicly clarified that they do not support proposals to weaken the ETS framework as suggested at the Antwerp Summit. Instead, over 100 businesses and industry associations have expressed explicit support for a stable carbon market. Nordic companies recently issued a joint letter emphasising the importance of a predictable carbon price for investment planning, and several Italian business leaders have voiced similar positions. Echoing this broad support from business and investors, several European leaders have issued a joint letter in support of a robust ETS, stating that climate policies are essential for Europe’s future. Taken together, these developments raise the prospect of a political showdown over the ETS ahead of this week’s Environment Council and European Council meetings, focusing on Europe’s competitiveness and industrial policy. Strong support can emerge ahead of the post-2030 policy cycle, which will run whilst half of EU citizens go to vote next year in 9 important elections.
ETS provides the necessary certainty for business and investors
These debates take place as businesses across the continent decide where to invest. Companies planning large industrial projects rely on predictable frameworks and policy stability. Investments in new facilities, technology upgrades, or modernised production assets often involve billions of Euros and require long-term planning, making predictability crucial. The ETS has been providing this certainty to inform investment decisions in technologies expected to operate for decades.
Companies like steelmakers (Salzgitter, Stegra, ThyssenKrupp) or cement (Heidelberg Materials) illustrate how a predictable carbon market supports investment in innovation and industrial transformation. For companies evaluating long-term projects, stable rules help maintain the confidence needed to proceed with investment decisions, ultimately preserving jobs and the EU as a thriving business location. Instead, uncertainties create the real cost.
What decision-makers can focus on now
As ministers and leaders discuss competitiveness and industrial policy, several priorities can reinforce investment certainty and support Europe’s industrial transformation.
- Use all revenues to support industry and households: With scarce national budgets, it becomes imperative to use all ETS revenues to advance decarbonisation (as agreed in law). Many countries raising concerns about the ETS are not using the revenues appropriately.
- No “blank cheque” for companies: Targeted sector-by-sector approaches can be designed in conjunction with other policies such as the Industrial Accelerator Act, and the various funds. They can benefit from conditional incentives now, such as Made-in-Europe policies or possible free allocations.
- A holistic approach to the ‘end game’: Whilst support is growing to adjust the linear reduction factor to avoid a ‘zero’ point before 2040, it is vital that the predictability and stability for investments are preserved. Weakening the factor too substantially, too early, is a risk.
A reformed ETS can strengthen innovation, support industrial modernisation and improve Europe’s attractiveness for long-term investment. As discussions on competitiveness intensify, preserving this stability offers companies the clarity needed to plan the next phase of Europe’s industrial transformation.
