EU Carbon Market Reform Meets Dispute Over Competitiveness FEB 12, 2026
- Ana Cunha-Busch
- 3 days ago
- 2 min read
EU Carbon Market Reform Meets Dispute Over Competitiveness
While the European Union prepares a major reform of its carbon market, a parallel political dispute is gaining momentum: who is responsible for the loss of European industrial competitiveness — Brussels or the member states themselves?
At the heart of the debate is the revision of the Emissions Trading System (ETS), the bloc's main climate instrument. Created to meet the 2030 target, the system now needs to be adjusted to meet the proposed 2040 objective: to reduce emissions by 85%.
According to Kurt Vandenberghe, head of the European Commission's climate department, the current model "is not adequate for 2040" and needs to be redesigned to boost investment, innovation, and decarbonization cost-effectively.
Carbon Leakage and Free Licenses
One of the most sensitive points is avoiding so-called "carbon leakage" — the transfer of industries to countries with more lenient environmental regulations.
The Commission is assessing whether to maintain free CO₂ permits for industrial sectors, a mechanism created to protect European industry from international competition. However, maintaining these permits could weaken the carbon price signal, reducing the incentive for a clean transition.
The official reform proposal is expected after the European summer.
Competitiveness Under Pressure
The climate debate is taking place amid growing concerns about European competitiveness vis-à-vis the United States and China.
During a meeting of the European Council in Alden Biesen, Belgium, the President of the European Commission, Ursula von der Leyen, stated that the blame for excessive bureaucracy cannot fall solely on Brussels.
"We must also look at the national level," she declared, criticizing additional layers of domestic legislation that fragment the single market.
Von der Leyen cited persistent barriers—such as differences in weight limits for trucks between Belgium and France, obstacles in waste transport, and a lack of regulatory harmonization—that hinder cross-border trade.
Institutional Dispute
Germany and Italy argue that the EU should limit new legislative proposals considered excessively burdensome. German Chancellor Friedrich Merz criticized the European “regulatory machine,” calling for greater agility in reducing bureaucracy.
On the other hand, the Commission and experts argue that national protectionist solutions also weaken the internal market.
The European Commissioner for Industry, Stéphane Séjourné, is pressing governments to remove internal barriers identified as the “Terrible Ten” of the single market.
The Structural Challenge
The ETS reform reveals a greater challenge: the climate transition requires consistent European rules, but industrial policy remains strongly anchored in national interests.
If Europe weakens its carbon pricing system, it could compromise the green transition. But if it maintains internal barriers, climate ambition alone will not guarantee competitiveness.
The central question now is whether the European Union and Member States will be able to align climate and economic growth in a coordinated and strategic way.
The Green Amazon News – International
This text was compiled using public data, scientific reports, and information from meteorological institutions.
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