The non-paper lays out five points that should be addressed by the IDAA:

1. A framework for incentivizing investments
2. Supporting demand for climate friendly materials and products
3. Protection against carbon leakage
4. Competitive energy prices
5. Level playing field for European industries

Within these points, several ETS-relevant topics were raised.

The Innovation Fund was brought up as an important source of financing for industrial decarbonization, the need to reform the EU CBAM to avoid circumvention and non-compliance was raised, and the need to amend and extend the ETS State aid guidelines beyond 2030 for new and existing sectors to continue to receive indirect cost compensation was highlighted.

The most impactful topic raised in the paper was a reference to “a reinforced stability of the ETS carbon price, through, for instance, some changes within the ETS architecture to better address price volatility”. No specific changes to the ETS architecture were suggested.

The non-paper emphasizes something that the ETS market has known since the last round of reforms: that post-2030, the EU ETS will be increasingly industry-centric. If member states see stable price paths as being key to keep industry in Europe, it will likely be a focal point of the upcoming ETS review. This may be the first signal to the Commission that this is what member states expect to see in the upcoming proposal for post-2030 ETS reforms.

Following the release of the non-paper, EUA prices have fallen by around EUR 2/t, or 2.5%. Whether or not this is an attempt by these member states to slow the walk towards its 2040 ambition, it is clear that the market is sensitive to policy signaling around softening targets. This reaction is likely premature but highlights that policy news will be an increasingly important driver as the next round of ETS reforms nears.