Insight
The EU Emissions Trading System in a larger EU by Elisabetta Cornago, 24 July 2025 The EU should include candidate countries in its Emissions Trading System (ETS) to provide them with a strong incentive for decarbonising their carbon-intensive electricity mix and heavy industries. But this should be done gradually to prevent a high carbon price from crippling their economies. Due to the looming EU Carbon Border Adjustment Mechanism (CBAM), EU candidates have an additional incentive to establish a national or regional carbon price, as they will soon be subject to carbon fees when exporting certain carbon-intensive goods to the EU. But few candidate countries have implemented carbon pricing, and regulatory readiness for the EU ETS remains limited. Implementing a gradually increasing national or regional carbon price in candidate countries would be a stepping stone towards joining the EU ETS. It would also provide the right price signal to accelerate the much-needed decarbonisation of electricity and heavy industry. The Commission should put in place safeguards for the ETS to withstand higher demand for emissions permits. It should also increase dedicated funds to support producers and consumers in new memberstates, which still have relatively low GDP levels, in adjusting to a new carbon price. Integrating the more carbon-intensive economies of new EU member-states in the EU’s climate policies is an important challenge. The EU Emissions Trading System (EU ETS) is the EU’s carbon market. To meet 2030 climate targets, the ETS’s emissions cap has recently been tightened. But should the EU embrace more member-states, the cap would need to be revised again, and so would the speed at which emissions are expected to drop. Enlargement forces the EU to rethink the ETS – balancing climate ambition with economic reality. The ETS cap must translate into a meaningful carbon price. At the same time, it must reflect the fact that industry and power sectors in candidate countries are more carbon intensive than in the EU-27. CER INSIGHT: THE EU EMISSIONS TRADING SYSTEM IN A LARGER EU 24 JULY 2025
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