EU ETS reform: my article in Agenda Digitale after the Brussels European Council

On 25 March 2026, Agenda Digitale published an article of mine on EU ETS reform, written in the wake of the Brussels European Council of 19-20 March. Below is a summary of the main points. For the full text please refer to the original article.

→ Read the full article on Agenda Digitale

The Brussels paradox

At the European Council of 19-20 March, an instructive political paradox played out: eleven governments, Italy leading, called for the suspension of the ETS, while eight Nordic and Iberian countries defended it as the cornerstone of European climate policy. The Commission held the line: no suspension, but a reform proposal by July 2026.

In the article I argue that both sides are wrong. Those who want to suspend the ETS do not understand what worked. Those who defend it without reforming it do not understand what broke.

The data the debate ignores

The ETS in its original design was one of the most intelligent policy instruments ever produced by the European Union. Not a tax: a market. The data from the Carbon Market Outlook 2025, which I coordinated with the Energy & Strategy Group of Politecnico di Milano, confirm this: in Italy, emissions from ETS-covered sectors fell by 49% between 2005 and 2024. This result was achieved because of the market, not despite it.

What broke and why

The problem began with the progressive abandonment of free allocations in favour of auctioning. With auctions, the flow of value that previously circulated among operators in the productive system is intercepted by the state and the EU, approximately €38.8 billion in 2024. The system is no longer a market. It has become a tax administered through a market mechanism.

What to ask of the Commission by July

In the article I identify two directions for a reform consistent with market economy principles. The first is the extension of free allocations, calibrated on a decarbonisation curve that industry can actually follow, with particular attention to hard-to-abate sectors. The second is opening to the international market for high-quality CO2 credits, for between 15% and 30% of ETS obligations, already aligned with Article 6 of the Paris Agreement

A note I could not avoid making

The article also includes a reflection on the quality of the public debate: in the weeks before the European Council, we heard ETS emission permits confused with voluntary CO2 credits, and CO2 credits confused with certificates linked to electric vehicle quotas. If you want to negotiate in Brussels on something as technically complex as carbon pricing, you need to arrive at the table prepared.