The European Parliament's Committee on the Environment, Climate and Food Safety held a public hearing on 2 June 2026 to assess the EU Emissions Trading System (ETS) and discuss its future direction, with MEPs staking out divergent positions on carbon pricing ambition, free allowances, and social fairness. EPP MEP Peter Liese opened by stressing the need to maintain the ETS as the EU's main climate tool while addressing carbon leakage and competitiveness. S&D MEP Mohammed Chahim pushed back against calls to weaken the system, arguing that higher carbon prices are necessary to drive industrial decarbonisation. Greens-EFA MEP Bas Eickhout questioned the effectiveness of free allowances and called for a faster phase-out.
ECR MEP Alexandr Vondra expressed concerns over the social impact of rising energy costs and urged more support for energy-intensive industries.
Renew MEP Emma Wiesner highlighted the importance of linking the ETS with the Carbon Border Adjustment Mechanism (CBAM) to protect EU industry. The hearing featured expert testimonies from the European Commission's Director-General for Climate Action, who outlined plans to expand the ETS to new sectors, and from industry representatives who warned against overly ambitious timelines. No formal decisions were taken, but the debate will feed into the upcoming revision of the ETS Directive. The hearing exposed a central cleavage between those prioritising climate ambition and those focused on industrial competitiveness and social costs. A faster phase-out of free allowances, as advocated by Eickhout, would increase costs for heavy industry and power generators, potentially accelerating decarbonisation but raising carbon leakage risks if CBAM is not fully operational. Conversely, maintaining free allowances longer, as implied by Liese and Vondra, would protect energy-intensive sectors from immediate cost pressures but slow the transition and reduce ETS auction revenues available for social compensation. Chahim's defence of high carbon prices would push industry to invest in green technologies, benefiting climate goals but raising energy costs for households and businesses. Wiesner's emphasis on ETS-CBAM linkage aims to level the playing field for EU producers while ensuring importers face equivalent carbon costs, a move that could reduce leakage but increase administrative complexity. The Commission's plan to expand the ETS to new sectors, such as road transport and buildings, would broaden the carbon price signal but could face political resistance due to potential social impacts. The upcoming ETS Directive revision will need to balance these competing pressures, with the Parliament's position expected to reflect the range of views aired in the hearing.