European Commission Electrification Action Plan and ETS review

Context and target

The Commission proposes an Electrification Action Plan and an ETS review to accelerate industrial and economy-wide electrification. While 70% of EU electricity is from domestic clean sources, the electrification rate has stalled at 23%. The Commission will assess an indicative 46% electrification target by 2040, which it says could cut the EU's fossil fuel import bill by €260 billion per year by 2040.

ETS review: investment, stability and scope

The ETS review updates the Linear Reduction Factor to 3.7% for 2031–2035 and 1.7% for 2036–2040, allows up to 2% high-quality international credits in 2036–2040, and integrates permanent carbon removals. The proposal strengthens the ETS for aviation, maritime and waste incineration, reforms the Market Stability Reserve to improve predictability, and links free allocation more closely to domestic decarbonisation investments.

Funding and measures

The Industrial Decarbonisation Bank will mobilise €100 billion for industrial decarbonisation, with an ETS Investment Booster before 2030 and continued support from the EU ETS Innovation Fund. Member States would be required to spend 50% of national ETS revenues on ETS-sector decarbonisation, with the package amounting to more than €100 billion in investments before 2030.

Electrification plan: barriers and tools

The Action Plan targets the electricity–fossil price gap, long grid connection times, upfront costs and slow uptake of technologies. Measures include empowering Member States to reduce network charges and taxes for certain consumers, faster smart-meter rollout, funding tools (social leasing, ETS instruments, the Social Climate Fund, the Industrial Decarbonisation Bank, a Clean Heat Market mechanism) and a Grids Package to speed connections and utilisation. It also promotes skills and manufacturing scale-up to capture job creation potential.