The EU Emission Trading System (EU ETS) is a central pillar of EU climate policy. It aims to reduce greenhouse gas emissions by putting a price on CO₂, operationalising the polluter pays principle, while generating revenue to support the energy transition. The system currently covers power generation, industry, aviation and maritime transport (ETS1) and will be extended to emissions from buildings and road transport through a second system (ETS2), due to enter into force in 2028.

The EU ETS is far from perfect. It has notable shortcomings that must continue to be addressed and improved to deliver on both its environmental and social objectives. Yet after 20 years of existence, it has also proven its efficacy and clear potential. Over time, successive revisions have strengthened the system, making it more robust. Emissions in ETS1-covered sectors have declined by 51% since 2005. At the same time, the system has generated substantial revenues, €39.8bn in 2024 alone, creating a significant opportunity to finance climate action and support for households and industry during the transition.

But while emissions have fallen overall, progress remains uneven across sectors. Industrial emissions, still heavily covered by free allowances, are stagnating, aviation emissions are increasing, and emissions from road transport and buildings have proven particularly difficult to reduce. These trends underline both the importance of continuing to improve ETS1 and the necessity of effectively implementing ETS2 to tackle emissions where they have so far been most persistent. The priority now is not to weaken the system, but to build on its progress.

At a moment when climate change is already hitting people hard, through more frequent and intense floods, droughts and heatwaves, the need for effective climate policy has never been clearer. Adding to that a context of energy price volatility and geopolitical uncertainty, accelerating the shift away from fossil fuels is not only a climate imperative but also an economic and security priority. By making pollution more expensive, and clean alternatives more competitive, the EU ETS can help drive investment into renewables, energy efficiency and industrial transformation, while providing revenues that can help make the transition affordable to households.

Yet the EU ETS is facing increasing political pressure. As ETS1 is set to be revised in 2026 and ETS2 is approaching its 2028 launch, there is a real risk of backsliding. Calls for simplification, competitiveness and short-term relief risk weakening the system at precisely the moment when it needs to deliver more. This guide outlines critical policy recommendations ahead of the review of ETS1 and on ETS2 implementation. This advocacy guide includes practical tools to assist civil society allies, including key narratives and messages, strategic advocacy moments, a timeline, main stakeholders involved in the policy-making process, and key readings and resources.

The task ahead is to continue improving the EU ETS: strengthening its environmental integrity, supporting investment in a competitive low-carbon economy, and ensuring it delivers both emissions reductions and a fair transition.