Peter Liese, the European Parliament's lead negotiator on emissions trading reform, has outlined a compromise that would significantly narrow the scope of the European Commission's proposed investment obligations. Rather than applying mandatory investment requirements to all free CO2 certificates, Liese suggests limiting them to additional allowances issued from 2031 onwards.
The proposal emerges just weeks after the European Commission unveiled its ETS revision on 17 July 2026. Industry lobbying intensified immediately, with energy-intensive sectors arguing the original plan amounted to excessive regulatory interference in corporate investment decisions.
Liese told Handelsblatt he is considering softening the Commission's approach. His position matters because as rapporteur he will lead parliamentary negotiations with the Council and Commission on the final legislative text before the next trading period begins.
The Commission's original proposal and industry reaction
Under the Commission's July proposal, companies receiving free CO2 certificates under the Emissions Trading System would face mandatory investment requirements attached to all their allowances. The intention was to ensure free permits directly support decarbonisation rather than simply protecting competitiveness.
Industry representatives immediately characterised the plan as state investment steering. Chemical producers and steelmakers argued they already face sufficient pressure from rising carbon prices without additional strings attached to their free allocations. The concern extends beyond Germany to manufacturers across the EU who compete with producers in jurisdictions with weaker climate regulations.
The timing of the backlash reflects genuine anxiety about the 2031 trading period. Companies need certainty about their cost structures years in advance to plan capital investments in furnaces, chemical plants and production lines that operate for decades.
Liese's compromise targets additional allowances only
The rapporteur's alternative would apply investment obligations only to additional free certificates issued from the start of the next ETS trading period in 2031. Existing baseline allocations would remain unaffected by the new requirements.
This distinction matters commercially. Companies know their baseline allocations based on historical production data. Any additional free allowances would represent new support beyond what they currently receive. Tying investment conditions only to this incremental portion reduces the regulatory burden on existing operations while still advancing the Commission's decarbonisation objectives.
Liese's position reflects the Parliament's role as mediator between Commission ambitions and member state concerns. Germany's manufacturing sector, represented by companies like Krupp-Mannesmann, has been particularly vocal about preserving competitiveness during the energy transition.
ETS performance since introduction
The emissions trading system has delivered measurable results since its launch. Sectors covered by the ETS have reduced emissions by 50% compared to baseline levels. This track record gives both sides ammunition: the Commission can point to the system's effectiveness, while industry can argue further tightening risks undermining what already works.
The 50% reduction figure comes from industrial operators themselves. Hüttenwerke Krupp-Mannesmann in Duisburg cited this statistic when discussing the system's impact on steel production. The data suggests the ETS has functioned as intended without the investment obligations now under debate.
Negotiating dynamics between institutions
As rapporteur, Liese occupies a pivotal position in the legislative process. He will shape the Parliament's negotiating position before trilogue discussions with the Council and Commission begin. His public signalling of a compromise position suggests the Parliament may seek middle ground rather than backing the Commission's full proposal.
The European Parliament has historically taken ambitious positions on climate legislation, but economic pressures following the energy crisis have made legislators more attentive to industrial competitiveness concerns. Liese's CDU affiliation also matters: German conservatives typically balance climate ambitions with manufacturing protection.
People mentioned
Organisations
European Commission · European Parliament · CDU
