EU Commission to unveil ETS reform and electrification plan Friday — climate credibility on the line

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BRUSSELS — The European Commission on Wednesday mourned the victims of climate change. A slate of high-profile announcements on Friday will show whether those solemn words were more than just lip service.

In recent years, the EU executive has insisted it can lace the continent’s climate efforts into a corset of competitiveness, bowing to the demands of European industrial giants and their political allies without compromising on its ambitions to curb planet-warming emissions.

This week marks a moment of truth for this balancing act. On Friday, the Commission will unveil two flagship proposals: A plan to boost the energy transition, including an EU-wide electrification target; and an overhaul of its core climate legislation, the Emissions Trading System, which determines how fast industry, airlines and shipping companies will go green.

The ETS reform proposal, in particular, will demonstrate whether Brussels can deliver on its promise to strengthen Europe’s flagging manufacturing industry while plotting a course to the EU’s legally binding net-zero target in 2050.

The electrification plan, meanwhile, will seek to tackle one of the greatest bottlenecks in the bloc’s energy transition — the switch from technologies that burn fossil fuels, such as combustion engines and gas boilers, to those that run directly on power, such as electric cars and heat pumps.

For both proposals, the Commission will lean heavily on the narrative that slashing fossil fuel use is good for the EU’s economy, reducing the bloc’s exposure to volatile import prices and driving domestic investments.

Climate, in rhetorical terms, is an afterthought: In a leaked draft of the electrification plan , the emissions impact was mentioned only once.

But how ambitious the two proposals are will determine whether the EU executive can keep the pollution-slashing promises it insists on remaining committed to despite the economic and political headwinds.

Only two days before its Friday announcements, the Commission held an event to commemorate the victims of climate disasters, coinciding with the fifth anniversary of the deadly floods that killed nearly 250 people in Germany, Belgium and neighboring countries.

“The victims we remember today deserve more than our sympathy,” EU climate chief Wopke Hoekstra told Wednesday’s ceremony in a video message. “They deserve real determination to stick to our promises.”

Friday will show how real that determination actually is.

What’s in the pipeline

The ambition of the ETS, the bloc’s carbon market , will in large part dictate whether the EU will meet its climate targets. The current system, which forces big emitters such as steel mills and power plants to pay for the CO2 they release while limiting how much they are allowed to pollute overall, is designed to meet the bloc’s 2030 goals.

The current system, which forces big emitters such as steel mills to pay for the CO2 they release while limiting how much they are allowed to pollute overall, is designed to meet the bloc’s 2030 goals. | Sean Gallup/Getty Images

The long-anticipated reform will set out the path beyond this decade. As the ETS covers around half the bloc’s emissions and has proven to be its most effective tool for cutting pollution, the revised rules are expected to do the heavy lifting for meeting the EU’s 2040 and 2050 climate targets.

But the Commission has come under intense pressure to go easy on industry as manufacturers struggle to cope with high energy costs and fierce competition from the United States and China. Many companies are demanding that the EU executive reduce the cost of carbon and give them more leeway to pollute.

There are signs Brussels will comply, at least to a degree, by giving factories more pollution permits free of charge and softening the trajectory of emissions cuts. Just how far the Commission should go, however, was still a matter of internal debate as late as Thursday.

On the electrification side, the Commission is set to propose an EU-wide target to replace fossil fuel combustion with direct electricity use by 2040, among other measures.

Although the exact figure has yet to be decided, the emissions cut could be significant: The Commission indicated in the leaked draft that meeting the new target could cut the EU’s gas use by two-thirds and halve its oil consumption by 2040.

Still, the plan is framed less as a climate policy than an economic and energy security strategy to lower energy costs, strengthen competitiveness and reduce Europe’s exposure to volatile fossil fuel markets. The target also doesn’t specify if the electricity used to meet the goal should come from renewable sources.

Post-proposal politics

It’s not all down to the Commission, however.

Friday’s two announcements are the executive’s first major climate policy proposals since last year’s emissions-slashing target for 2040. The fierce debate around the new goal, which eventually passed in a weakened state, showed just how difficult green policymaking has become during Commission President Ursula von der Leyen’s second term.

The Commission is anticipating the ETS battle will play out along similar lines, with a group of climate-ambitious countries — led by the Nordics and the Netherlands — pushing to preserve the system’s emissions-slashing potential and another, larger group campaigning to soften the rules in line with industry demands.

That group, led by Poland and Italy, issued a not-so-subtle reminder earlier this week — via a letter restating their position just as commissioners’ chiefs of staff gathered to finalize the proposal — that they effectively represent a blocking minority, so the Commission better deliver something they can work with.

This letter is “a gentle reminder that we are a significant group whose weight cannot be ignored,” Krzysztof Bolesta, Poland’s secretary of state for climate, told POLITICO.

Defenders of ambitious climate measures have also sought to make their voices heard, with Swedish company Vattenfall plastering “Don’t mess with ETS” signs around the Commission’s headquarters.

But even EU government heavyweights such as France and Germany are leaning toward a more cautious approach on green policy, and conservative forces in the European Parliament are also pushing lawmakers to adopt a softer stance.

As a result, any ambitious climate plans face a serious risk of being watered down in the subsequent negotiations — no matter how strong the Commission’s determination to deliver on its climate promises ends up being.