With the Commission’s ETS Directive review proposal due 15 July, Veyt hosted two fireside conversations with key European Parliamentarians who will have their say on the file: Peter Liese (EPP), a long-standing architect of the EU ETS and MEP since 1994, and Michael Bloss (Greens), who is already announced by his group to be the shadow rapporteur in the ETS review file. Putting the two sessions side by side shows that they share a lot of common ground on principal questions, but diverge sharply on pace, sequencing, and what the system needs in the short-term.
Here you can find the recordings with Peter Liese and Michael Bloss.
Liese’s position is that the current 4.4% linear reduction factor was never calibrated to be the permanent architecture. He argued that it was pushed higher than his original 4.2% proposal by Parliament’s own amendments, and at that pace, the cap hits zero in 2039, before any credible decarbonisation pathway exists for aviation, chemicals or steel. His call: reduce the LRF to 3.4%, which he frames as a moderate position given Poland is arguing for 2.4%. In Veyt’s modelling, a 3.4% LRF adds approximately one gigaton to the Phase 5 carbon budget and shifts net-zero in ETS sectors to around 2042.
Bloss disagrees. His read is that the Commission’s own impact assessment already shows around 200 Mt of residual ETS emissions in 2040, meaning there is some in-built leeway, and that removing the MSR invalidation clause already provides the recalibration the system needs. In his view, lowering the LRF before 2035 would destabilise the investment signals companies are currently relying on.
On the MSR, Liese was explicit that the invalidation clause fix, proposed by the Commission in April, should clear committee and plenary in September, with trilogue potentially avoidable if Parliament’s position aligns with the Council. In Veyt’s modelling, removing the invalidation clause could grow the MSR reserve way beyond its current maximum of 400 million allowances, providing meaningful flexibility for the post-2030 market in case the system is turned from a stability- into a liquidity instrument. Agreeing that fix on the September timeline would be a tangible signal that the legislative machinery can deliver speedy results — and would remove at least one source of ongoing uncertainty before the broader review negotiations get fully underway.
Both MEPs accept that free allocation cannot last forever. But Liese’s starting point is the 2022 ITRE amendment he co-authored — a slower CBAM phase-in and a free allocation end-date of 2035 rather than 2034, with a shallower slope in the near-term years. The question, as Liese put it, is the slope over the next three to four years and where the end date finally lands.
Michael Bloss argued for expanded CBAM coverage rather than extending free allocation. His observation that some companies are actively asking to come under the CBAM umbrella — preferring regulatory certainty to free allocation uncertainty. Where they do agree: Liese’s insistence that free allocation must come with binding site-level investment obligations, Bloss does not oppose in principle. This conditionality mechanism may be one of the deal-making elements that could bridge the two camps.
Liese’s coalition strategy, evaluating options ranging from ECR to the centre-left, has worked in other files this term and is his explicit starting point for the ETS review. He was clear about the Patriots, noting their blocking of the simplified MSR procedure showed they “are not interested in solutions, they are interested in problems.”
Bloss did not map his coalition strategy as explicitly, but his confirmed role as Greens shadow rapporteur, and the joint letter with S&D and liberals calling for a minus 90% aligned ETS cap, signals a centre-left defensive bloc that Liese will need to work with in some form.
When asked about the German Chancellor’s market-moving comments in Antwerp, Liese referred to his meetings with Merz afterwards, who made clear that one of Germany’s core principles is that companies which have already invested in decarbonisation must not be penalised. Liese characterised Merz as one of the system’s most important political supporters; the market might see this differently.
The details of where the July proposal lands might matter less than the clarity with which it lands. What the past five months have demonstrated is that political noise alone is enough to do real damage: EUA prices fell from €93/t in January to below €65/t by mid-March not on any fundamental shift, but on speculation and poorly framed political statements.
The EU ETS works as a decarbonisation instrument precisely because it gives investors a long-term price signal to plan against. Every month of policy uncertainty is a month in which capital allocation decisions are delayed, deferred or, worse, redirected away from European industrial transformation entirely. The companies that have already invested based on the current framework need regulatory certainty to validate those decisions. Those that have not yet invested need it even more urgently to justify committing now. That said, both MEPs, from opposite ends of the political spectrum on this file, spoke with notably more measured, analytical language than the rhetoric that dominated the debate during February and March.
And all three European institutions (Commission, Parliament, Council) have agreed on finalising the review by the first quarter of 2027. Even though this seems overly ambitious, it shows the intention to advance quickly and provide that clarity for investment decisions.
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