The International Emissions Trading Association (IETA) has published a vision paper calling on the European Union (EU) to keep its flagship carbon market rule-based and free from political interference after 2030, while expanding its scope, linking with the UK, and integrating carbon removals into compliance systems.
The paper, released Tuesday, comes as the EU prepares to review the Emissions Trading System (ETS) following the adoption in March 2026 of a net 90% emissions reduction target for 2040.
The ETS has generated more than €245 billion (nearly $280 billion) in auction revenues since its launch and covers power, heat, and industry.
After 2030, IETA warns, a shrinking cap and rising prices will intensify pressure for ad-hoc political interventions of the kind already seen, including an April proposal to short-term revise the Market Stability Reserve (MSR) and a negotiated one-year delay to ETS2.
Relevant: ETS2 Carbon Market Needs Certainty, Not Delays, IETA Warns
IETA argues the MSR should transition from a surplus-management tool to a predictable market-stability mechanism suited to tighter supply conditions, with any adjustments made transparently and without diluting climate ambition.
On scope, the paper supports evaluating waste incineration’s addition to ETS1 and extending ETS2 to cover rail, inland waterways, off-road machinery, and agricultural fuels, as well as non-CO2 aviation emissions.
It also supports exploring closer interaction between ETS1 and ETS2, including potential merging under appropriate conditions.
In regard to linking, IETA identifies a swift EU-UK agreement as a priority, arguing that market integration reduces carbon leakage and competitiveness risks and can complement border adjustment measures.
On removals, the paper backs compliance pathways for both engineered solutions such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS) and high-integrity nature-based removals, arguing that voluntary demand alone cannot drive removals at the scale the EU’s 2040 and 2050 targets require.
As for international credits, IETA supports their use toward the 2040 target within the 5% cap set in European Climate Law, urging the Commission to begin preparatory governance and procurement work immediately so pilots can launch from 2031 as planned.
Read more: IETA Appoints New EU Policy Director Amid Carbon Market Expansion
