Weakening the EU Emissions Trading System Means Handing the Future Race to China

The political chainsaws are revving, relentlessly tearing at the very foundations of the EU Emissions Trading System (ETS). This spiraling political uncertainty is already inflicting tangible damage on our industrial base.

The chorus of critics from industry is getting louder. Just recently, Evonik CEO Christian Kullmann publicly demanded a radical reform and the abolition of this "CO2 fee." This criticism is finding dangerous traction in politics, too: rhetorical attempts to distance themselves – such as Tilman Kuban (CDU) or EVP Vice-President François-Xavier Bellamy's call to suspend the Green Deal – are creating an immense climate of instability.

This is not mere background noise; it is actively harming our economy. German industry, particularly the basic materials sector, must make pivotal investment decisions in the next two years. Instead of the political reliability and clear framework they desperately need, they face a vacuum.

Two of our global leaders in climate-neutral steel production, Thyssenkrupp and Salzgitter, already have pioneering plants under construction. Both planned to decide on the next phases of their transformation next year. They have now postponed those forward-looking decisions. The reason? The massive uncertainty, also with respect to the policy landscape. Investing in climate-neutral processes simply won't pay off if conventional competitors are allowed to receive free or cheaper certificates for longer due to a weakened ETS.

The Self-Fulfilling Prophecy
 

The debate alone is directly causing a delay in critical green investments. Every delay, however, means more certificates are consumed in the short term, making the necessary transformation path toward mid-century steeper and more expensive. As CO2 prices rise and the deadlines shrink, political pressure will increase exponentially. What is already a difficult, rocky road will become an insurmountable cliff.

At the end of that road, the ETS will inevitably lose its credibility as an instrument. And the moment market players lose faith in political resolve, they will halt their own investment plans. The criticism of the EU ETS thus becomes a self-fulfilling prophecy. This outcome would be devastating – not just for climate protection, but for the entire European economy.

Historically, the ETS has proven to be an extremely effective and cost-efficient instrument. Empirical studies show that economic side effects like Carbon Leakage have been largely contained. Moreover, the system is economically sound: it minimises the costs of transformation and generates crucial revenue that funds complementary policies and subsidies. Where else will the state find the money to support the energy and industrial transition if not from these earnings? Any conceivable alternative is not only less effective but also simply unaffordable.

The Wrong Competition
 

Undeniably, German industry, especially the chemical and steel sectors, is in a tight spot, squeezed by international rivals and the weakness of major customers like the automotive industry. Companies absolutely need short-term support to finance the transition out of their conventional profits.

But we must ask: Which competition are we arming ourselves for? Weakening the ETS might temporarily boost our position in the fossil competition. But European industry cannot win against the US, which boasts cheap natural gas and a government ruthlessly supporting the fossil industry's rearguard battles. This race has the wrong finish line, and we are already guaranteed to lose.

Meanwhile, China is successfully deploying all its power to become the superpower of the fully electrified industry of the future. If we secure a small, temporary advantage by weakening the EU-ETS in the competition of the past, we simultaneously trip ourselves up in the race for the future. We have already fallen behind hopelessly in solar and battery, and are about to lose contact in EVs. Handing it over to China would also cost us our promising position in essential areas like electrolysers, green basic materials (steel and cement), industrial plant construction for green processes, and other environmental technologies.

Politics must now make an unambiguous commitment: the EU-ETS is not just a climate tool, but a central steering instrument for the future viability of our industrial location. To weaken it is to actively sabotage the German economy.

This statement appeared in Tagesspiegel Background on 30 October 2025.