Statement by Romina Pourmokthari

Right now, Europe is suffering from historically severe heatwaves. Tens of thousands of deaths have been reported over the course of only a few weeks. Forests are burning. Crops are drying up. This is Europe in the summer of 2026 – and against this backdrop, the European Commission is presenting a proposal that undermines our most important tool to mitigate climate change – the EU Emissions Trading System (ETS).

We stand behind the ETS because we know that it works. Thanks to the ETS, emissions from relevant sectors have been halved since 2005. It has helped bring about a dramatic phase-out of coal from our energy production. Gas and oil are next in line, as clean alternatives become more profitable and the risks associated with dependence on imported fossil fuels have become tangible.

In spite of this success story, the lobbying efforts of a number of less ambitious Member States – particularly during the spring – have unfortunately borne fruit. The ambition level of the proposal is inadequate and threatens to derail industry’s transition.

It is proposed that the Linear Reduction Factor (LRF) – the pace at which emissions allowances within the ETS decrease – be reduced from 4.4 per cent per year to 3.7 per cent in 2031 to 2035 and to 1.7 per cent starting in 2036. This diluted ambition rewrites the rules of play for companies that have invested billions of in their climate work. The European Commission is accommodating the segment of industry that has not made those investments – at the expense of those who have done what is right. Punishing the companies that are at the leading edge is not competitiveness policy.

Moreover, the European Commission is extending the free allocation of emission rights for established industries until 2038, which further reduces the incentive for transition. Lowering the reduction factor and simultaneously providing compensation with significantly increased transition support, financed by ETS revenue, is not a market-driven transition – it is subsidy policy.

If we are to reach 90 per cent by 2040, and climate neutrality by 2050, measures beyond the ETS are also required – in agriculture, forestry, land use and transport. But a watered-down ETS automatically shifts a heavier burden to those sectors. Then it will be the motorist who pays more. It will be the forest owner who faces even stricter logging regulations. It will be the farmer who, already encumbered by drought and crop loss, must pay an even greater share of the bill. This is neither reasonable nor smart. 

If we are serious about strengthening Europe’s competitiveness, what is needed is exactly the opposite: a stable and predictable price on emissions in the ETS. That is what will give the business sector the confidence to make long-term investments. That is what will bring about innovation and technical solutions that reduce emissions and strengthen our competitiveness.

The Swedish Government will fight to maintain a strong EU ETS in the negotiations that are now being initiated – with our sleeves rolled up and with the Swedish business sector and industry behind us. We will oppose any attempt to dilute the system. And we are not alone in pursuing this course of action. Together with Denmark, Finland, Luxembourg, the Netherlands, Portugal and Spain, we drafted a letter in which we stressed the importance of a linear reduction factor that is in line with the goal of a 90 per cent emissions reduction by 2040. Germany has taken a similar stance. 

The uncertain geopolitical situation reinforces the grounds for staying the course. Every barrel of oil and every cubic metre of gas that we phase out reduces our dependence on countries that do not share our values – countries that would not hesitate to use energy as a weapon against us. A weaker ETS extends our dependence on fossil energy from authoritarian regimes. Our ability to stand on our own two feet, being fossil-free and self-sufficient, is now as much a security issue as it is a climate issue.

The proposal also entails that international credits could be used as compensation for emissions reductions in the ETS for the period 2036–2040. This is where I want to be clear: international credits should not be used to decrease the incentive to reduce emissions in the ETS.

The inclusion of vessels with a gross tonnage of at least 400 GT in the system is a positive development. Currently, they are covered by neither EU nor IMO climate instruments, which is a distortion of competition that must be rectified. At the same time, a simplified reporting system could lighten the burden for smaller operators.

I welcome that waste incineration is now being included in the review. Sweden’s experience has shown that this drives the expansion of carbon capture and storage, reduces the fossil share of waste flows and boosts incentive for emissions reductions, particularly once district heating is covered by ETS2 starting in 2027.

Europe is sweltering right now. Last year’s heatwaves and flooding cost Europe’s economy more than USD 40 billion. The bill this year will likely be even higher. The last thing we should do is stray away from the tool that has been most successful at slowing climate change.

The Swedish Government chooses to defend the ETS – for Sweden’s competitiveness, for the companies that dared to invest in the future and for the sake of our climate.