On 17 July 2026, the European Commission published an impact assessment accompanying proposals to revise the EU Emissions Trading System (ETS) Directive and related legislation, setting a domestic net greenhouse gas reduction target of at least 85% by 2040 compared to 1990 levels for ETS sectors. The document, prepared by DG CLIMA, rejects direct integration of international credits into the ETS, proposing instead that the cap be adjusted for centrally purchased credits under strict criteria, with revenues from auctioning additional allowances financing such purchases. The assessment covers stationary installations, aviation, and maritime, but excludes ETS2 (buildings, road transport, small industry).
The impact assessment is triggered by review clauses under Articles 3gg, 28b, and 30 of the ETS Directive, and Article 3 of the Market Stability Reserve (MSR) Decision. It notes that the EU ETS achieved over 50% emissions reductions by 2025, exceeding the 43% target set in 2018 for 2030. A 62% emission reduction target for stationary installations, aviation, and maritime by 2030 (vs 2005) remains in place. The modelled scenario for 2040 assumes an 85% domestic reduction, excluding costs of credit purchases. The Commission proposes keeping the ETS cap tight for domestic reductions, rejecting direct use of international credits by operators, and instead using centralised credit purchases to allow limited additional emissions space from 2036, with a possible use of international credits up to 5% of 1990 emissions starting in 2036.
The impact assessment outlines several policy orientations and trade-offs. By rejecting direct crediting, the Commission avoids undermining domestic abatement incentives but introduces complexity in centralised purchasing and cap adjustment. The approach aims to balance cost-effectiveness with environmental integrity, ensuring that international credits supplement rather than replace domestic reductions. The exclusion of ETS2 from this assessment means that sectors like buildings and road transport will be addressed separately.
Stakeholders are affected differently. EU ETS operators face continued pressure to decarbonise domestically, with no option to use international credits directly, potentially increasing compliance costs for some sectors. However, the centralised purchasing mechanism may lower overall costs if credits are cheaper than domestic abatement. EU taxpayers and consumers may benefit from lower overall mitigation costs, but could face higher energy prices if domestic reductions are more expensive. Environmental NGOs may welcome the rejection of direct crediting, but may criticise any use of international credits as undermining EU climate leadership. EU regulatory bodies, including the Commission and member state authorities, will need to design and oversee the centralised credit system, adding administrative complexity.
The proposals will now be transmitted to the European Parliament and the Council for negotiation. The impact assessment provides the analytical basis for the legislative process, with expected debates on the stringency of the cap, the role of international credits, and the treatment of different sectors. The Commission's approach signals a preference for maintaining a strong domestic reduction trajectory while allowing limited flexibility through centralised mechanisms.