Brussels Redesigns Its Carbon Market for the 2030s, Betting €100 Billion on Industry Buy-In

• ▸The European Commission proposed a reform of the EU Emissions Trading System on July 17, 2026, setting the legal framework for Phase 5 (2031-2040) and aligning it with the EU's target of a 90% net reduction in greenhouse gas emissions by 2040 versus 1990 levels.
• ▸The centerpiece is a new Industrial Decarbonisation Bank backed by a €100 billion budget to help fund emission-cutting projects in heavy industry, alongside a slower annual allowance-reduction pace (3.7% for 2031-35, down from 4.3% today) and an extended phase-out of free allowances for CBAM-covered sectors through 2038.
• ▸Free allowances from 2031 become conditional: 80% released once a company publishes a verified decarbonisation investment plan, with the remaining 20% paid only after emissions cuts are actually demonstrated — a shift from allocating credit up front to paying most of it on delivery.