Europe wants an electric economy. Weakening the ETS would make it harder to build.
María Mendiluce, CEO, We Mean Business Coalition
This article was originally published on Linkedin.
Just before the summer recess, the European Commission put two big files on the table: the Electrification Action Plan and a proposal to revise the EU Emissions Trading System.
The Electrification Action Plan sets out for industry where Europe wants to go. The ETS helps decide whether the economics will take us there.
It affects the choices companies make every day: whether to keep relying on fossil fuels, or whether to invest in electric furnaces, heat pumps, EV fleets, cleaner steel and cement, renewable electricity, storage and flexibility.
This is why the debate around the ETS cannot be treated as a technical Brussels discussion. It is a law. It is a price signal. It is one of the main reasons companies can make long-term investment decisions in Europe.
A strong ETS rewards companies that move. Weakening it sends a very different message: invest now, and the rules may be softened for those who waited.
That is a real problem for companies putting capital into cleaner production, transport, power, buildings and manufacturing in Europe.
Both the ETS and the Electrification Action Plan matter for business but – let me add some spice to this – “business” is not one voice.
Some companies are already investing in the shift from fossil fuels to clean electricity. They want clear rules, a strong carbon price and electricity systems that can handle new demand. Others benefit from delay. Policymakers need to understand the difference.
Earlier this year, calls to substantially weaken the ETS were presented as having the support of more than 1,300 companies. That claim was later found to be inflated.
A company or trade association’s loudest position is not always its most representative one. And when policymakers hear “business wants lower carbon costs”, they need to ask: which business?
The companies investing in Europe’s clean economy have been clear on where they stand. They have said it more than once:
- Earlier this year, nearly 150 companies and investors came forward to defend the ETS, in a coalition effort with Corporate Leaders Group Europe, Cleantech for Europe and Business for CBAM Coalition.
- More than 70 companies and business networks, including SAP, Danfoss, Volvo Cars and SSAB, also backed Corporate Leaders Group Europe’s EU statement on clean electrification.
- In June, 112 businesses representing $1.5 trillion in annual revenue called on governments to put clean electrification at the centre of economic and industrial strategy, with support from businesses ranging from Schneider Electric and Unilever to Nikon, Ingka Group | IKEA and H&M Group.
- Senior leaders from Ball Corporation , Siemens and Iberdrola also joined We Mean Business Coalition and Corporate Leaders Group Europe in writing to President von der Leyen on what a useful Electrification Action Plan needs to do.
The message across these statements is consistent: businesses do not want more exposure to volatile fossil fuel markets. They want faster electrification, stronger electricity systems and a carbon price that holds long enough to justify investment.
This is the link between the ETS and the Electrification Action Plan.
The Electrification Action Plan should make clean electricity easier, cheaper and faster to use. A 46% electrification target by 2040 guides industry on where Europe wants to go. But a target on paper will not electrify a factory, connect a heat pump, or get a grid queue moving.
Member States now need to do the practical work:
- rebalance taxes so electricity is not punished against fossil fuels
- get grids and connections moving faster
- make electricity markets reward flexibility
- stop subsidizing the fuels Europe says it wants to leave behind
Together, the ETS and the Electrification Action Plan can help shift capital away from fossil fuel dependence and towards the electric economy Europe says it wants to build.
This summer made the cost of delay visible again. Heat, drought and wildfires have hit livelihoods, transport, water, power generation and infrastructure across Europe. For companies, these are not distant climate stories. They are operational risks. The case for a fast transition to a resilient European economy powered by clean energy is clear. But ambition without advocacy isn’t enough. Commitments alone do not shape policy. Speaking up does.
For companies looking for a practical guide to doing this, our recent Responsible Policy Engagement in the EU guidance with Corporate Leaders Group Europe sets it out clearly: your public affairs work, and the trade groups acting in your name, should support the same policy conditions your plans to cut emissions depend on.
That sounds obvious. In practice, it means knowing what is being said in your name, correcting the record when needed, and speaking publicly when the policy debate is being distorted.
For European companies, the choice this autumn is practical.
- Know what your trade associations are saying.
- Speak up when the position does not reflect your investment plans.
- Make the case for the ETS and the Electrification Action Plan in the same direction: a strong carbon price, faster electrification and policy that gives companies confidence to invest.
- The business voice will be heard in Brussels in the coming months. If companies investing in Europe’s energy transition stay quiet, others will gladly speak for them.
Read our guidance for European businesses and policymakers on responsible policy engagement in the EU.