On 20 May 2026, European Commissioner for Climate Action Wopke Hoekstra addressed the European Parliament in a debate on reviewing the EU Emissions Trading System (ETS) to support European competitiveness. Hoekstra argued that the ETS must be reformed to reward frontrunners while providing flexibility for the majority of industry, ensure that ETS revenues are redirected to industrial investments, and address level-playing-field distortions through the ETS and Carbon Border Adjustment Mechanism (CBAM).
Hoekstra framed the debate around three interconnected challenges: the climate crisis, competitiveness issues, and energy vulnerability. He noted that Europe heats up faster than the rest of the world, imports over 80% of its gas and 95% of its oil, and must bring climate, competitiveness, and independence together. While the ETS is a pivotal market-based instrument that has worked well, he said, the system needs to move "from good to great."
The speech contained several concrete proposals for ETS reform. First, Hoekstra called for rewarding companies that have already invested in the transition, while offering flexibilities—linked to conditionalities and investments in Europe—for the majority of firms that have not yet fully decarbonised. Second, he highlighted that 80% of ETS revenues currently go to member states, and of that, roughly 90% is spent on general budget items rather than industry. He argued this must change so that public and private funding go hand in hand. Third, he opened the door to expanding the ETS scope to include waste, international credits, and negative emissions, subject to conditions and parameters to be discussed. Fourth, he stressed the need to fix level-playing-field distortions for sectors such as cars, solar, wind, and chemicals, both within the ETS and CBAM and beyond, stating that "we no longer live in the rosy period we called the nineties."
Hoekstra acknowledged that broader measures beyond the ETS are needed, including Buy European policies, simplification, circularity, tech investments, and reforms. He emphasised that the ETS reform is part of a larger agenda to address Europe's structural challenges.
The debate marks the beginning of a legislative process. Hoekstra committed to further discussions with Parliament groups, member states, and industries in the weeks and months ahead. No prior coverage of this specific debate exists in the recent record, making this the first detailed public outline of the Commission's direction on ETS revision for competitiveness.
EU heavy industry and clean-tech companies would benefit from rewards for early investments and from redirected revenue streams, but face conditionality and potential compliance costs from expanded scope. EU member states would lose flexibility in spending ETS revenues, as a larger share would be earmarked for industrial investments rather than general budgets. EU consumers could see higher costs if ETS expansion raises carbon prices, but may gain from reduced energy vulnerability and stronger domestic industry. Non-EU exporters to the EU would face tighter CBAM rules as part of level-playing-field measures, potentially increasing trade friction.