‘We can no longer afford that’: Climate commissioner blasts firms using ETS savings to invest in China
At present, many eyes in Brussels are on a German MEP from the European People's Party: Peter Liese, lead lawmaker for the reform of the Emissions Trading System (ETS 1) in the European Parliament. For what is at stake with this reform is nothing less than the future of industry, the fight against climate change and the question of Europe’s energy independence.
Liese made a key demand during a debate on the proposed reform with EU Climate Commissioner Wopke Hoekstra – the discussion centred on the future use of the billions in annual revenue generated by the ETS 1. “We need to focus on the carbon leakage sectors: steel, cement, chemicals – they have the biggest problem,” said Liese. “We should guarantee that they get a bulk of the money.” In the draft report he intends to present today (11 September), the lead lawmaker sets out five key demands regarding the reform of the ETS 1, according to a source familiar with the matter.
You can read more about this in today’s cover story. Welcome to the Friday edition of The Kelvin Report, written here by Sinan Reçber in Berlin – this time featuring a few graphic elements.
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Snapshot
- €2 trillion reform: MEPs take a stand on public procurement
- Energy infrastructure: MEPs want to expand and protect energy networks
- ETS 1 reform: EPICO think tank warns of consequences for green investments
- Heavy industry: Aluminium producers furious as the European Commission scraps export duties
But first ...
‘We can no longer afford that’: Climate chief blasts firms using ETS savings to invest in China
by Sinan Reçber
EU Climate Commissioner Wopke Hoekstra wants to put a stop to industrial companies profiting from their special privileges under the European Emissions Trading Scheme (ETS 1), only to invest those funds abroad instead. “You have companies that take free allowances, sell them on the market, invest in China and then come to Brussels to complain about the ETS system,” Hoekstra criticised during a debate in the European Parliament’s Environment Committee on Thursday on the proposed reform of the carbon price. “That is something we can no longer afford to allow.”
The background: Industry is allocated free CO₂ allowances by EU Member States, and in some cases even more than it emits in CO₂. In 2025 alone, Europe’s industrial plants accounted for around 416 million CO2 allowances worth more than 30 billion euros, according to the think tank Agora Energiewende. The German chemical company BASF has also benefited from these special privileges under the ETS 1 – it is one of the most vocal critics of the planned reform and only opened a new mega-plant in Zhanjiang, China, in March, having previously invested nine billion euros in the project.
During the debate, Hoekstra also complained that EU Member States do not invest a large proportion of ETS-1 revenues in industrial decarbonisation. “In many cases, it is used for other budgetary priorities, and sometimes it is just used to make sure that debt is being paid,” said the Dutch politician.
According to Hoekstra, the Commission’s reform proposal addresses both of the issues mentioned – free allowances and financial support for the decarbonisation – as follows: “It demands that companies actually invest the money on European soil.” Secondly, the Commission is calling on Member States to channel the revenue into industrial decarbonisation and thus to invest in those sectors that generated the funds from the European Emissions Trading Scheme in the first place, according to the senior EU politician.
MEP Peter Liese (EPP, Germany), the lead lawmaker in the European Parliament for the ETS 1 reform, called during the debate for ETS 1 revenues to be channelled in future primarily towards the decarbonisation of very specific industrial sectors. “We need to focus on the carbon leakage sectors: steel, cement, chemicals – they have the biggest problem,” said Liese. “We should guarantee that they get a bulk of the money.”
In 2024, EU-wide ETS-1 revenues totalled 38.8 billion euros, with 24.4 billion euros going directly to the EU Member States. According to figures from the European Commission, the EU Member States invested just 0.8 billion euros of these revenues in industrial decarbonisation in the form of carbon capture, utilisation and storage (CCUS), energy efficiency or low-carbon technologies.
In his speech, Liese, as climate policy spokesperson for the largest political group, also challenged those MEPs who are calling for EU Member States, rather than the Commission, to oversee the use and quality of international carbon credits. “Do you really think the Member States are more serious on high-quality projects?”, asked the MEP, referring to a possible review of climate protection projects abroad. “Or shouldn’t we be a partner of the Commission to really do good projects that really help the climate and trigger development also in third countries?”, the MEP asked the assembly.
Mohammed Chahim, a Social Democrat MEP (S&D/Netherlands), expressed doubts that the ETS-1 reform would bring about greater climate protection, greater competitiveness and energy independence for Europe – and cited research by the Dutch Bureau for Economic Policy Analysis.
According to the calculations, the Commission’s proposed ETS 1 reform would increase the European Union’s emissions under ETS 1 by 33 per cent (2.9 gigatonnes of CO₂ by 2050). “That is more than 20 times the Netherlands’ emissions,” Chahim pointed out. At the same time, the price of natural gas for industry would fall only slightly, by around 2 euros per megawatt hour. “I want ordinary Dutch people and ordinary Europeans to see the benefits reflected in their wallets, but I do not see that happening yet,” said the Social Democrat.
Today, Friday (11 September), MEP Liese intends to present the draft of the European Parliament’s negotiating position on the ETS 1 reform. According to a source familiar with the matter, this draft report will essentially set out five demands. On the one hand, the Christian Democrat wishes to set a different pace for decarbonisation under ETS 1: under his proposal, emissions are to fall by 3.4 per cent per year in the first half of the 2030s, rather than by 3.7 per cent as proposed by the European Commission. From 2036 onwards, this linear reduction factor is to be 2.3 per cent rather than 1.7 per cent.
Furthermore, the lead lawmaker intends to auction off the 250 million additional CO₂ allowances for the purchase of carbon removals as early as 2029, rather than waiting until 2031. According to his wishes, up to 20 per cent of the removals procured may be attributed to biochar – a technology whose long-term effectiveness in removing CO₂ is in question.
Thirdly, the linear reduction factor in ETS 1 should not, as proposed by the Commission, automatically revert to 2.7 per cent if the planned purchase of up to 260 million international, high-quality carbon credits fails.
Fourthly, Liese apparently wishes to extend free allocation even further than provided for in the Commission’s proposal: in 2030, companies are to continue to receive 70 per cent of free allowances. Furthermore, from 2031 onwards, only one-third of all CO₂ allowances allocated free of charge are to be subject to the condition that the companies benefiting from them also invest in decarbonisation. This proportion of free CO₂ allowances subject to these conditions is to increase gradually by 2035.
Fifthly, according to the source, the CO₂ price in the ETS is intended to counteract price swings in both directions. Should it fall by more than 25 per cent within three months, the so-called Market Stability Reserve (MSR) is to remove 25 million allowances from the market, thereby reducing supply. If the CO₂ price rises by more than 25 per cent, the MSR is to release the same quantity back onto the market, thereby increasing the supply of allowances. Liese intends for the European Parliament to finalise its position for the trilogue negotiations by the end of the year.
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MEPs are positioning themselves on the EU reform of the €2 trillion public procurement sector
MEPs have set out their positions on the reform of public procurement, a sector worth more than 2 trillion euros, which is currently underway. For example, the Social Democrats in the European Parliament (S&D Group) intend to campaign for the introduction of stricter climate protection standards in the reform of EU-wide public procurement than those proposed by the European Commission.
“European public money and procurement should be a lever in our common fight against the climate emergency and social inequalities”, Laura Ballarín, the Spanish MEP and S&D coordinator for the European Parliament’s Committee on the Internal Market and Consumer Rights, said on Wednesday. “During the upcoming negotiations, we will make sure that our social and green standards are strengthened in the text.”
Positive signals have emerged from the largest political group in the European Parliament regarding the proposed Public Procurement Act, which covers, for example, the public procurement of electricity grid components and electric buses, as well as the construction of public buildings such as schools and hospitals. “The consolidation of several European legislative acts and the simplifications contained in the proposal are to be expressly welcomed,” said Christian Doleschal (EPP), the German MEP and vice-chair of the lead Committee on the Internal Market and Consumer Protection (IMCO), on Wednesday.
According to some environmentalists, the Commission’s proposal does not go far enough. “Sustainability without mandatory weighting risks undermining the multiplier effects of large-scale demand for decarbonised products”, stated the Brussels-based environmental organisation ECOS on Wednesday.
Furthermore, the NGO argues that the reform could undermine EU sustainability targets in other areas. “For example, the 10+ sectors covered by the Ecodesign for Sustainable Products Regulation (ESPR) might suffer from lower ambition, because the default 30% weight it gives to sustainability as part of awarding contracts would be repealed.” This could result in key markets that are not sufficiently transformed, slowing both competitiveness and decarbonisation, the environmentalists warn.
The Oslo-based environmental organisation Bellona made similar remarks on Wednesday. “Optional use of environmental criteria is not going to cut it: voluntary approaches have already been tried under the current framework, and they have failed to deliver scale”, Irene Domínguez Pérez, an expert on lead markets at Bellona Europa, criticised in a statement. “If the Act is serious about turning procurement into a strategic tool, it must include mandatory minimum environmental requirements that go at least as far as current sectoral legislation.” snr
Parlamentarians want to expand and protect energy networks
Members of the European Parliament’s Committee on Energy (ITRE) are seeking to secure more funding for interconnectors, more joint energy scenarios and stronger protection for energy infrastructure as part of the future expansion of European energy networks. On Thursday in Brussels, a large majority of committee members voted in favour of a corresponding position on the reform of the EU legislation on trans-European energy infrastructure.
The lead lawmaker on the EU file, Tsvetelina Penkova (S&D, Bulgaria), said on Thursday: “The new rules should help reduce the electricity price disparities among member states and regions, ensuring that all EU citizens can benefit from a more integrated energy market, stronger security of supply and fairer access to affordable energy, regardless of where they live.”
Thomas Lewis, an energy policy expert at the environmental organisation Climate Action Network (CAN) Europe, welcomed the vote. “In the face of yet another fossil fuel crisis, any move towards unity in our energy planning should be seen as a positive step in the right direction towards a renewable energy system”, wrote the climate campaigner in a blog post on Thursday. “The sharing of infrastructure and renewable power cross-border can lead to lower investment costs and support lower bills while boosting energy security and climate ambition.”
The next step is for the plenary session of the European Parliament to vote on the position before trilogue negotiations can begin on the final details of the reform. This step is regarded as a formality. Among EU Member States, there is significantly greater resistance to EU-wide planning of electricity, gas and hydrogen networks worth billions, centrally coordinated by the Commission. The national capitals also want to set the share of so-called congestion rents for new interconnectors at a lower level than the Commission proposes, and to increase it gradually instead. snr
Think tank sees risks for green investments as a result of the ETS 1 reform
The Berlin-based think tank EPICO has warned of the consequences for companies investing in climate protection should the EU significantly reduce the European carbon price. In a new policy brief, the organisation – which has close ties to German and European Christian Democrats – is particularly concerned about the planned reduction in the ‘linear reduction factor’ (LRF), a sort of pacesetter within the Emissions Trading System (ETS 1).
“A slower cap decline has direct consequences for early movers”, the analysis states, regarding the European Commission’s proposal for reforming the ETS 1. “Such an adjustment lowers the expected return on low-carbon investments already made and risks reducing future allowances scarcity relative to the trajectory firms had previously priced in.”
The author and EU carbon market specialist Svea Nyberg points out that investment decisions on industrial decarbonisation are made over decades, and that a predictable, long-term price signal matters more than any single parameter. Whilst EPICO supports, in principle, the Commission’s intention to incorporate CO₂ removals and international carbon credits into the ETS 1, it also sees risks for the future of this decarbonisation instrument.
“Without clear guardrails, there is a real risk of repeating the oversupply problems that have previously undermined confidence in the ETS”, warns the think tank – and calls for “clear volume limits” and “quality thresholds” for CO₂ removals and international credits before the EU integrates them into ETS 1. Today, Friday (11 September), MEP Peter Liese (EPP/Germany), the lead legislator for the ETS 1 reform, intends to present his draft of the European Parliament’s negotiating position (see cover story). snr
Aluminium producers furious as EU Commission scraps export duties
The European aluminium industry is up in arms over the European Commission’s recent decision not to introduce export duties on aluminium scrap for the time being. In a letter published on Wednesday addressed to Commission President Ursula von der Leyen and Industry Commissioner Stéphane Séjourné, the industry association writes: “On behalf of the entire European aluminium industry, we are writing to express our profound shock, disappointment and anger over Friday’s announcement that the long-awaited and urgently needed proposal for a Council Regulation establishing an export duty on aluminium scrap has been (at least temporarily) withdrawn.”
The association European Aluminium states in the letter dated 7 September that aluminium scrap is a strategic resource and a critical raw material for achieving Europe’s goals in terms of circularity, decarbonisation, economic security and strategic autonomy. “Our industry has continued to invest heavily in developing secondary production technology and capacity”, the letter continues. “Now, just two weeks before the scheduled publication of the proposal […], we learn that the Commission is unable or unwilling to proceed at this time.”
The industry suspects that a “geopolitical context” lies behind Brussels’ decision to handle aluminium scrap differently than planned and to use alternative policy instruments. “We do not believe they constitute a plausible alternative to the planned export duty in and of themselves”, states European Aluminium.
The boom in battery storage, electric cars and other clean technologies is driving global demand for aluminium. Yet instead of using this raw material – classified as strategic – for domestic production, Europe is exporting ever-increasing quantities of the light metal to the rest of the world in the form of scrap. State-subsidised Chinese metal and recycling companies, in particular, are able to snap up the scrap from their competitors and are waging a price war against European aluminium producers. Some domestic factories have already lost this battle and have been forced to close.
Last year, the European Commission expressed its concern: “If the EU does not take action in response to these challenges, there is a serious risk of insufficient aluminium scrap available and of the EU aluminium industry becoming unviable in the mid to long term”, Brussels warned in its call for a public consultation. snr
Coming up: What's next in energy, industry and climate
- 13 September: Sweden's national election
- 14–17 September: Plenary sitting of the European Parliament in Strasbourg
- 14 September, 17.00 – 20.30, European Parliament (Strasbourg): Joint debate - Emissions trading
- Carbon Border Adjustment Mechanism: extension of its scope to downstream goods and anticircumvention measures - Report: Mohammed Chahim (S&D)
- Establishing the Temporary Decarbonisation Fund - Report: Pascal Canfin (Renew)
- Market stability reserve for the EU Emissions Trading System (EU ETS): ceasing the invalidation of allowances - Report: Pierfrancesco Maran (S&D)
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