EU Emissions Trading: Steady Route Towards Net Zero – Or Bumpy Ride Ahead?

Within the Fit for 55 framework a range of EU emissions trading (EU ETS) reforms were adopted in the spring of 2023, including an increased 2030 target and a steeper annual reduction of allowances. Formally, a path has been established that means no new allowances to be allocated after 2039. However, there are political clouds on the horizon and several types of on-going and potentially increasing ‘turbulence’. For instance as witnessed in the 2024 European Parliament elections a right-wing wind is blowing in much of Europe; with one of its central priorities to roll back climate policy. To what extent and how is the EU ETS now ‘durably designed’ and likely able to withstand turbulence and backlashes? This key question is addressed by drawing both on theory on turbulence and design durability, document studies, and insights from the history of the ETS. The paper identifies several institutional strengths. But the picture is far from clear-cut and several challenging scenarios are identified and discussed.