A group of ten countries is calling on the European Commission to review the Emissions Trading System (ETS), describing the current legal framework as an “existential risk” for many key industrial sectors, according to a letter reported by several European media outlets.

In the letter, signed by the leaders of Austria, Bulgaria, Greece, Italy, Poland, Romania, Slovakia, Hungary, Croatia, and the Czech Republic, calls on the EU’s ETS executive body to extend free carbon emission allowances beyond 2034, noting that otherwise their industries will be unable to bear the costs. The countries believe that a thorough review of the Emissions Trading Scheme (ETS) is necessary, aimed at mitigating its impact on electricity prices and reducing the risk of fluctuations in carbon allowance prices.

“European industry is committed and continues to take the necessary steps to transform its business models,” the letter states. “However, combined with high energy prices and the phasing out of free allowances under the ETS, the current framework is becoming an existential risk for many strategic European industrial sectors.”

Pressure on the Commission to abolish the ETS, the bloc’s carbon emissions trading market, is mounting ahead of Thursday’s meeting of EU leaders in Brussels, which aims to discuss the looming energy crisis triggered by the war in Iran. Some EU countries want to abolish the EU carbon market, others want to reform it, and still others want to keep it.

The call comes in response to a statement by Ursula von der Leyen that she will support the carbon emissions trading market, recognizing it as an essential tool of climate policy for reducing emissions and directing funds toward clean technologies — a different response than what energy-intensive industries had expected, having presented strong arguments against the ETS during an industry conference in Antwerp in February.

The ten countries argue that the EU carbon market is evolving too rapidly, putting pressure on businesses already squeezed by high energy prices and persistent inflation. The result is a growing threat to Europe’s industrial heartland and, with it, to the continent’s economic strength.

“Energy prices have skyrocketed, inflation has made the investments needed for the transition even more expensive, and current decarbonization solutions are not yet sufficiently developed to ensure economic sustainability for industries where it is difficult to reduce emissions,” the letter states, as quoted by European media.

Commission President Ursula von der Leyen and European Council President António Costa stated after the informal EU summit in Alden Biesen that the bloc would “present options” at the European Council meeting on March 19, but emphasized “the complexity of the issue”: electricity prices are linked to natural gas, and changing the system involves many elements that must be taken into account, such as national taxes, grid fees, and the Emissions Trading Scheme.

Key demands in the letter:

• Extending free allowances under the Emissions Trading Scheme (ETS) beyond 2034—currently, companies receive a certain amount of free allowances so they do not have to pay for all their emissions. They want this support to continue longer so that businesses are not hit with the full costs too soon.
• to slow the pace of the phase-out of free allowances, which begins in 2028, giving companies more time to adapt.
• to reduce fluctuations in the price of carbon so that it becomes more stable, giving businesses the opportunity to plan ahead without sudden cost shocks.

In addition, the EU is called upon to change the philosophy of the ETS and adapt its approach to climate policy to the individual needs of each country.

In addition to the current ETS, changes to the carbon emissions trading scheme, known as ETS2, will require payment for CO2 emissions from heating and transport fuels starting in 2028, and the revenue collected should help households and businesses invest in electric vehicles and energy-saving renovations. In Bulgaria, revenues from emission allowances allocated under ETS1 are used consistently to reduce the price for public service obligation  (zero leva (EUR since July 2022).