May 2026
As part of its 2026 evaluation of the EU Emissions Trading System (ETS I), the European Commission is assessing how the system can be further strengthened to support the EU’s decarbonisation objectives. Energy Efficiency for Europe welcomes this opportunity, recognising the ETS as a central instrument for reducing emissions in covered sectors and the positive contribution of measures, such as the Market Stability Reserve, to improving the system’s effectiveness.
At the same time, Energy Efficiency for Europe identifies several areas where targeted improvements could enhance the system’s performance. A key priority is reducing the administrative burden associated with ETS audits and verification procedures; whilst robust monitoring is essential, streamlining information sharing and coordination processes would improve efficiency without compromising the integrity of the system.
The federation also calls for greater transparency regarding the use of ETS revenues by Member States. Detailed, accessible, and publicly available information on how these revenues are allocated would facilitate accountability and help ensure that ETS proceeds are directed towards decarbonisation efforts.
Particular attention is also given to the role of waste heat recovery. The federation warns that extending the ETS scope to activities such as Municipal Waste Incineration (MWI) could increase the cost of waste heat recovery and undermine its contribution to local decarbonisation objectives. At the same time, it argues that industrial waste heat recovery should be more effectively incentivised within the ETS framework, specifically noting that the current application of the Carbon Leakage Exposure Factor (CLEF) does not adequately reward waste heat exchanges. Energy Efficiency for Europe therefore calls for a revision of the allocation methodology to better reflect the emissions reductions delivered by waste heat recovery projects.
Finally, the federation argues that lowering the current 20 MW installation threshold, thereby extending the ETS to smaller facilities, would create disproportionate administrative and financial burdens without delivering significant additional climate benefits. Overall, Energy Efficiency for Europe calls on the Commission to consider a gradual extension of free allowances for the district heating and cooling (DHC) sector beyond 2030, to support a fair transition.