The EU must turn the ETS into Europe’s electrification engine

WindEurope calls on the European Commission to maintain a clear and predictable carbon price signal, and ensure ETS revenues are geared towards industrial electrification. In the upcoming EU ETS review, the Commission must ensure ETS-linked funding instruments prioritise sectors that can be electrified using commercially available technologies. This will have the biggest impact, displacing imported fossil fuels and making Europe more energy secure and competitive. The ETS generated €43 billion in 2025. But today only about 5% of reported ETS revenues go to industrial decarbonisation. This ETS review is a unique chance to change that.

On 17 July the European Commission will unveil its review of the EU Emissions Trading System (ETS), alongside its new Electrification Action Plan. These proposals must deliver a single objective: cutting CO2 emissions and boosting industrial competitiveness by replacing imported fossil fuels with homegrown electricity.

In this context, WindEurope calls on the European Commission to strengthen the ETS architecture and maintain a clear and predictable carbon price signal. The Linear Reduction Factor and free allocation rules must be consistent with the EU's overarching decarbonisation pathway to 2040 and beyond. Crucially, the Commission should overhaul the use of ETS revenues.

WindEurope CEO Tinne Van der Straeten says: "ETS revenues need to be channelled into electrification projects. That's the way to strengthen Europe's competitiveness and sovereignty. Electrification immediately replaces imported fossil fuels with homegrown electricity and improves our energy security. Yet so far, ETS revenues have not been used in the right way. Take the Innovation Fund: the money is available, it has simply not been spent effectively."

Unused ETS revenues won't cut emissions, electrification will

The ETS generated around €43 billion in 2025. But only about 5% of reported ETS revenues go to industrial decarbonisation. This is a huge missed opportunity.

Electricity covers just 4% of the heat that European industry uses in its processes. Existing technology, like industrial heat pumps and electric boilers, could already electrify 930 TWh of that demand, most of it heat below 500°C. The barrier to industrial decarbonisation via electrification is not technology. It is a lack of focus in how Europe spends ETS revenue.

Take the EU Innovation Fund. By June 2025, it held €12.3 billion in available funding. It had disbursed only €331.8 million of that - 2.7%. Unspent funds only prolong our dependence on fossil fuels.

Here is what policymakers can do:

1. Preserve the ETS as a strong, predictable carbon price signal that drives the switch to renewables.

1. Direct ETS-funded instruments, such as the Innovation Fund, the ETS Investment Booster, the Industrial Decarbonisation Bank, towards industrial electrification in ready-to-electrify sectors, not speculative hydrogen, and CCS schemes.

1. Overhaul the Innovation Fund. Fund both capital and operating costs, open continuous and streamlined application windows, and target technologies that can scale today.

1. Recognise corporate power purchase agreements (PPAs) as a valid route to renewable electricity.

1. Reward projects that replace imported fossil fuels with homegrown power.

Why this matters for Europe's resilience

Europe imports more than 60% of the energy it consumes as fossil fuels, compared with 25% for China; the United States exports more energy than it uses. That dependence is costly and volatile: in the first 44 days of the Iran war alone, Europe spent an extra €22 billion on fossil fuel imports.

Electrification, powered by homegrown wind and solar, is the way to cut that exposure. Wind alone invested €45 billion in new capacity in 2025 and now supplies a fifth of Europe's power. The capacity is there. What is missing is the financing to connect it to industrial demand, which is exactly what ETS revenues should deliver.

Background

The EU Emissions Trading System, or ETS, is Europe's main tool to cut greenhouse gas emissions. It works on a "cap and trade" principle. The cap sets a limit on how much power plants and heavy industry can emit. That limit shrinks every year. Polluting companies buy allowances, one for every tonne of CO2 they release. They can trade those allowances with other companies. As allowances become scarcer over time, they cost more. This price signal incentivises companies to reduce CO2 emissions. Since 2013, the ETS has raised over €175 billion. Member States must use that money to support investments in renewable energy and energy efficiency.

The Electrification Action Plan, is the European Commission's roadmap to replace fossil fuels with clean electricity across industry, transport and buildings. It aims to accelerate the electrification of the EU's energy consumption, backed by sustained investment in clean energy and flexibility. To be issued on 15 July 2026, the plan will respond to a persistent problem: the EU's electrification rate has stagnated at around 23% of final energy consumption for over a decade. More than half of the EU's energy needs are still covered by imported fossil fuels. The Commission wants to change that. The Clean Industrial Deal and the Affordable Energy Action Plan have set a target to raise electricity's share of final energy use to 32% by 2030.

Electrification: The EU needs to treat electrification as a strategic priority, not a policy footnote. Today, electricity is less than 25% of the energy we use. This needs to change. As set out in the WindEurope 10-Point Plan for Electrification, Europe needs to boost the supply of abundantly available renewable electricity, connect this supply to demand, and ensure that electrification is always the easiest and cheapest option for companies and households.

Energy imports: Europe imports more than 60% of the energy it consumes as fossil fuels. China imports 25%. The United States exports more energy than it uses. In the first 44 days of the Iran war alone, Europe spent an extra €22 billion on fossil fuel imports. Homegrown renewable electricity is the way out. Wind alone invested €45 billion in new capacity in 2025 and now supplies a fifth of Europe's power. s of the Iran war alone, Europe spent an extra €22 billion on fossil fuel imports. Homegrown renewable electricity is the way out. Wind alone invested €45 billion in new capacity in 2025 and now supplies a fifth of Europe's power.