German economists back ETS reform over climate target rollback
A think tank says loosening Germany's decarbonisation goals would backfire, calling instead for a structural overhaul of the EU carbon market.
Four energy economists urged Germany on Thursday (2026-06-25) to prioritise reform of the EU Emissions Trading System rather than loosen the country's climate targets to ease pressure on industry, according to Montel. The distinction between the two approaches is not semantic: weakening national targets would hand industrial lobbies a short-term reprieve while eroding the policy architecture that has anchored European carbon markets for two decades.6
Germany's political debate has been running in both directions at once. The Greens have proposed a "golden rule" allowing a debt-funded ten-year €500 billion investment programme focused on climate and digital infrastructure, The Economist reported in May (2026-05-19). That sits in sharp contrast with industrial groups pressing for ETS relief — and the economists' intervention on Thursday (2026-06-25) was aimed at preventing the relief argument from overwhelming the reform one.3,6
The industrial pressure has a concrete basis. Germany's available power margin fell to the lowest level of the winter during the week of 2026-05-18 as low wind speeds and cold weather strained the grid, according to Bloomberg models cited by OilPrice.com. Companies operating in an already tight power market face a compounding burden when carbon costs rise simultaneously — and that combination has sharpened lobbying for ETS changes in Berlin.4
RWE chief executive Markus Krebber put the concern on the record in May (2026-05-07), telling Montel that some parts of Germany's industrial sector could fail without ETS reform. He specified that Germany "should continue to decarbonise" — but argued the current ETS design imposes costs that are not matched by equivalent obligations on international competitors. The think tank economists' position on Thursday (2026-06-25) aligns with Krebber's direction while explicitly rejecting the softer option of simply relaxing targets.5,6
The market design concern runs deeper than industrial competitiveness. Research by Oeko Institut published in May (2026-05-21) found that the EU ETS could face persistent oversupply until 2040 if proposed market reforms substantially increase allowance availability beyond system requirements, Montel reported. That finding complicates the reform case: a version of "ETS reform" that floods the market with allowances could suppress the long-run price signal that drives decarbonisation investment, producing the opposite of what industry needs in the medium term.2
The European Commission offered its own position in May (2026-05-21), approving a EUR 5 billion German state-aid scheme to help industrial companies reduce emissions through two-way carbon contracts for difference. Brussels described the scheme as "necessary and appropriate" and aligned with European and national environmental targets, according to Montel. The approval illustrates the Commission's preferred approach — co-designing relief mechanisms without altering the ETS supply framework.1
For carbon markets, the reform's direction still cuts both ways. A version that accelerates surplus removal through Market Stability Reserve changes or faster annual reduction factors would tighten forward allowance curves. A version that expands supply would cap that tightening. The think tank economists on Thursday (2026-06-25) argued for the former, and Germany's formal position in the reform process will shape which version reaches the European Parliament.6,2
Germany carries disproportionate weight in that negotiation. Any official indication from Berlin or Brussels of changes to the MSR or the annual linear reduction factor would move ICE EUA forward curves with real force — and traders watching the EU ETS reform timeline now have a clearer read on where the German academic community stands.1,2