EU leaders commit to emissions trading overhaul by Q1 2027

European leaders have committed to completing a comprehensive reform of the EU Emissions Trading System by the first quarter of 2027, marking a significant step in the bloc's efforts to balance climate ambitions with industrial competitiveness.

The timeline was agreed at an informal meeting of EU heads of state and government in Cyprus on April 24, with a review proposal expected to be unveiled in the third quarter of 2026.

This commitment forms part of the One Europe, One Market roadmap, which aims to deepen the bloc's single market while addressing concerns about the economic impact of climate policies on European industry.

The review will examine critical aspects of the carbon market architecture, including the trajectory of free allowances to energy-intensive industries, supply-and-demand mechanisms, and sectoral expansions.

The bloc's flagship carbon market has faced mounting criticism from several European leaders over its impact on heavy industry. This political pushback has pulled EU carbon prices down by almost Eur30/mtCO2e ($35.22/mtCO2e) since mid-January, when prices were near Eur93/mtCO2e.

Platts, part of S&P Global Energy, assessed EU Allowances for December 2026 at Eur74.99/mtCO2e on April 24 compared with Eur63.64/mtCO2e on March 19, when they slumped to an 11-month low.

The push for ETS reform comes as European industries face mounting challenges from higher energy costs and carbon compliance expenses compared with competitors in regions with less ambitious climate policies.

The EU ETS, which caps emissions from power plants and industrial facilities, has been credited with driving significant reductions in greenhouse gas emissions since its launch in 2005, but critics argue it requires adjustment to prevent carbon leakage and preserve industrial capacity within the bloc.