The European Parliament‘s lead negotiator Peter Liese has proposed directing 75% of national EU Emissions Trading System auction revenues into decarbonising industries covered by the scheme, increasing the proposed industrial reinvestment requirement above the European Commission’s 50% level.
The amendment forms part of Liese’s draft position on the Commission’s July revision of the EU ETS. The German European People’s Party MEP is also proposing a different trajectory for reductions in the emissions cap, easing the proposed tightening during the first half of the 2030s before increasing it later in the decade.
Under the Commission proposal, the linear reduction factor would move from the current 4.4% to 3.7% a year between 2031 and 2035 and then to 1.7% from 2036 to 2040, alongside limited use of international carbon credits. Liese’s draft proposes 3.4% from 2031 and 2.3% from 2036.
The two changes would reshape both sides of the carbon-market calculation faced by energy-intensive industry. A slower early reduction in allowance supply would moderate part of the near-term tightening, while the higher revenue earmark would return a larger proportion of auction proceeds to industrial decarbonisation projects.
The later 2.3% reduction factor would then accelerate the tightening relative to the Commission’s plan after 2035. Companies would gain more time during the first half of the decade but face a steeper reduction path later if major industrial projects slip behind schedule.
The Commission’s July proposal already attempted to strengthen the link between carbon pricing and industrial investment. It called for at least 50% of member-state auction revenues to be directed towards priorities including industrial decarbonisation, clean energy, electricity networks, low-carbon transport, circularity, waste-sector decarbonisation, research, and innovation.
EU ETS auctions have raised more than €258 billion since 2013, including more than €43 billion during 2025. Around €24 billion of the 2025 total went directly to member states, while other proceeds supported mechanisms including the Innovation Fund and Modernisation Fund.
Raising the earmark to 75% would therefore change how governments allocate an established revenue stream rather than create an entirely new industrial subsidy. Member states would retain less discretion to use those proceeds across other eligible climate measures if the Parliament’s final position follows Liese’s proposal.
How quickly industry can use the additional funding is a separate question. Steel, cement, chemicals, refining, glass, ceramics, and other process sectors require large investments in furnaces, electrical infrastructure, carbon capture, hydrogen systems, heat recovery, process changes, and supporting utilities.
Many of those projects take years to design and permit before construction begins. Grid connections, equipment supply, planning, financing, energy contracts, and infrastructure can delay investment even where public support is available, leaving a gap between allocating carbon revenues and reducing emissions from operating plants.
Research involving 830 German manufacturers has also linked investment decisions to carbon-price predictability. Companies were more willing to approve lower-carbon capital expenditure where expected EU carbon prices were both stronger and more predictable, while greater volatility increased the price required to generate the same investment response.
The cap trajectory therefore carries as much industrial weight as the revenue allocation. A steelworks or chemical plant considering equipment with a working life measured in decades has to model future allowance costs alongside electricity prices, available subsidies, utilisation, product demand, and the cost of competing technologies.
European policymakers are trying to maintain that investment signal without accelerating industrial closures or shifting production into regions with lower carbon costs. The July package consequently links ETS reform with wider industrial financing, electrification, grid investment, and clean-technology manufacturing rather than treating the carbon market as an isolated environmental mechanism.
Liese’s draft remains an opening negotiating position rather than final law. The European Parliament still has to establish its formal mandate, member states are developing their own position, and the completed legislation will be negotiated between the EU institutions.
The 75% figure is nevertheless likely to become a central part of that negotiation because it addresses a persistent complaint from industry: carbon costs arrive immediately, while the infrastructure and public support needed to remove those emissions can take much longer to reach a factory gate.
If a larger share of auction revenues is ultimately reserved for industry, attention will shift quickly from percentages to delivery. The value of the change will depend on whether the money reaches technically viable projects early enough for companies to complete them before the ETS cap tightens again later in the 2030s.
