Proposed ETS reforms threaten €90 billion in European green investment

The European Commission is currently reviewing the ETS to align with a 90% net greenhouse gas reduction target by 2040. While the system has successfully decarbonized the power sector, current proposals—including adjustments to the linear reduction factor and the introduction of unproven carbon removals—could destabilize the price signals that guide private capital. Data from Strategic Perspectives and Veyt indicates that these changes would slash decarbonization spending by over 25% compared to existing law.

National economies face uneven impacts from these shifts. The Netherlands faces the most severe contraction, with potential investment dropping by half to less than €20 billion. Germany and Italy face losses of €15 billion and €12.5 billion, respectively. These figures arrive as major firms signal that policy predictability remains the primary driver for multi-decade projects in sectors like steel and cement. By softening the market, the EU risks rewarding high-emitting competitors while penalizing industrial front-runners that have already committed significant capital to net-zero transitions.