On July 17, 2026, the European Commission proposed big changes to the EU's main tool for fighting climate change: the Emissions Trading System, or ETS. The plan would make it cheaper and easier for companies to comply with pollution rules, while also bringing new types of pollution under the system for the first time. The proposal came with a Q&A document and a press release focused on helping European industry stay competitive (European Commission).

The ETS has been running since 2005. Think of it as a system where the government hands out a limited number of "pollution tickets" to companies. Each ticket allows a company to release a certain amount of greenhouse gases. Over time, the government hands out fewer tickets, so the total amount of pollution goes down. Companies that clean up their act can sell spare tickets to others that still need them. The system is credited with cutting emissions by 47% between 2005 and 2023. The Commission said the changes are needed to keep the EU on track for its goal of cutting emissions by 90% by 2040 (The Guardian).

The push for change came from inside the EU. Ten member countries said the system raises energy costs and hurts European businesses. EU climate commissioner Wopke Hoekstra said European industries face "unfair competition from non-European rivals using heavy state subsidies and dubious labour conditions." Under the proposal, some heavy industries would get free pollution tickets for longer, and the total number of tickets would shrink more slowly than currently planned (The Guardian).

At the same time, the system would cover more types of pollution. The proposal would bring municipal waste into the ETS, encouraging recycling over burning trash. It would also cover more flights — those within 5,000 kilometres of a central point in Europe, reaching North Africa and the Middle East, but not routes to China or the United States. Private jets would be included for the first time (The Guardian).

The Commission had already taken related steps earlier in 2026. On May 10, it published updated benchmark values for the 2026–2030 period (European Commission). On June 11, it welcomed a political agreement to strengthen safeguards for a new version of the ETS that will cover buildings and road transport (European Commission). The Commission says money raised by the ETS gets reinvested into Europe's clean transition and industrial competitiveness (European Commission).

The idea behind the proposal is twofold: make pollution rules less costly for heavy industries that compete against subsidized foreign rivals, while pulling more pollution sources into the system. Giving out free tickets for longer and shrinking the total more slowly lowers costs for industry in the short term. Adding waste and aviation expands the system's reach.

The key question is whether these two changes cancel each other out, or whether making things easier for industry weakens the overall push to cut emissions. That depends on how fast the total number of pollution tickets keeps shrinking.

The reaction was quick. German Green MEP Michael Bloss said the Commission was giving industries "a licence to pollute for longer and at a lower cost" (The Guardian). His criticism gets at the heart of the debate: a system built to make pollution more expensive over time is now also being asked to protect industries from pressures that have nothing to do with carbon.

The proposal now goes through the EU's lawmaking process. The European Parliament and the Council (representing member states) will each form their own positions, then negotiate together on a final version. The 90%-by-2040 target will be the benchmark for judging whatever deal they reach.

One thing to watch is how this proposal interacts with a separate new system, called ETS 2, which will cover pollution from buildings and road transport. If the main ETS gets easier for industry while ETS 2 gets tougher on households and drivers, the political balance of who pays for cutting carbon could shift in ways that may be more controversial than the headline numbers suggest.