Europe’s emissions trading system is widely described as the EU’s most effective tool for cutting greenhouse gas emissions, because it sets a cap on pollution and puts a price on carbon. But new political pressure is building to soften key parts of the framework, including measures that keep the allowance market tight and preserve a credible carbon-price signal. Analysts warn that weakening ETS rules could lead to excess supply of permits, dampen investment in clean technologies, and slow the pace of decarbonization, reducing both environmental impact and industrial transformation momentum.
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