Von der Leyen Pledges ETS Reform and EUR 30 Billion Cleantech Fund

European Commission President Ursula von der Leyen announced plans to revise the EU Emissions Trading System within days and launch a EUR 30 billion decarbonization and cleantech fund financed by ETS revenues. The commitments followed a Euro Summit meeting focused on rising energy costs driven by the ongoing Middle East conflict.

Von der Leyen said near-term ETS changes would include updating benchmarks that determine free emissions allowances to industry and strengthening the Market Stability Reserve, the mechanism that manages allowance supply to support price stability. The Commission president acknowledged the need to make the system more flexible while defending its track record in reducing fossil fuel dependence. The proposed ETS Investment Booster, with a EUR 30 billion budget, would operate on a first-come, first-served basis and guarantee access to lower-income EU member states.

The ETS, established in 2005, covers key greenhouse gas-intensive sectors including electricity generation, oil refining, steel, cement, paper, chemicals, and commercial aviation. European industry has faced pressure from rising energy prices, first driven by the Russia-Ukraine war and intensified by the Iran conflict. Von der Leyen had previously defended the system but agreed to introduce reforms following calls from multiple member states. The European Council summit communique invited the Commission to present a comprehensive ETS review by July 2026.

Longer-term ETS reform is expected to include a more realistic carbon reduction trajectory and an extension of free allowances to industry beyond the current 2034 cutoff. The Investment Booster fund, once established, will channel ETS revenues into early-stage clean technology and decarbonization projects. For Indian industry, which faces EU Carbon Border Adjustment Mechanism obligations on exports of steel, cement, and other carbon-intensive goods, the direction of ETS reform will have direct implications for CBAM pricing and competitiveness planning.

Key figure — EUR 30 billion cleantech and decarbonization fund