Investors Managing Over €11 Trillion Warn EU: Don't Dilute the Carbon Market

What the investor coalition is demanding

Rather than simply defending the status quo, the investors are calling for the carbon market to evolve, supported by complementary industrial policies. Their specific demands are :

• Preserve a robust and predictable ETS. EU leaders must provide clear political backing for a rules-based carbon pricing framework, insulated from short-term political interventions that create market volatility.
• Do not dismantle, weaken, or suspend the system. Any fundamental change or ad hoc intervention would destroy the stable price signal needed to unlock long-duration, capital-intensive clean investments.
• Complement the ETS with targeted industrial policies. The real bottlenecks are grid build-out, electrification infrastructure, and the lack of a scaled clean-tech financing mechanism. These structural issues—not the carbon price—should be the focus of the upcoming legislative review.
• Avoid repeating the mistakes of the 2022 energy crisis. Haphazard interventions in core market fundamentals during that period undermined investment in competitive electricity assets and industrial decarbonisation projects. The coalition warns that applying the same playbook to the carbon market would raise the cost of capital and delay final investment decisions for clean energy projects .

The investors are effectively telling policymakers: if you want private capital to finance the clean industrial transformation, you must protect the investment case for doing so.

Why they oppose dismantling or weakening the carbon market

The coalition's opposition rests on three core arguments:

1. The ETS is the bedrock of investment certainty. Capital-intensive sectors such as steel, cement, chemicals, and aluminium require a credible, long-term carbon price trajectory to justify multi-billion-euro decarbonisation projects. Weakening the system would destroy the business case for the very technologies Europe needs to remain competitive in a global market .

2. Blaming the ETS for competitiveness woes is factually incorrect. Evidence consistently shows that the primary cost pressures on European industry come from high and volatile fossil-fuel energy prices—not from carbon pricing . An analysis by the think tank Bruegel found that the ETS has had "generally modest effects on competitiveness" and that French manufacturers, for instance, have made substantial emissions reductions without suffering competitive losses . A joint statement from signatories went further, calling the finger-pointing at climate policy "not only factually incorrect but also counterproductive" .

3. Market confidence is already fragile. The political noise alone has caused real damage. EU Allowance (EUA) prices plummeted from €90 in early January 2026 to a low of €67 in March after German Chancellor Friedrich Merz suggested the EU should be open to ETS revisions or postponements, and French President Emmanuel Macron blamed high carbon prices on speculation . Although prices partially rebounded after the March European Council meeting affirmed the "essential role of the ETS," the episode demonstrated how quickly political signals can destroy the stable price signal investors require .

What is at stake for private investment

The investors are clear that more than just the carbon price is at risk. The credibility of Europe's entire clean-industry investment framework hangs in the balance.

Capital flows to foundational industries. The business case for decarbonising steel, cement, chemicals, glass, and aluminium production depends entirely on a long-term carbon price trajectory that makes green products cost-competitive. Weakening the ETS would freeze or reverse these investment plans, which are already capital-intensive and carry long payback periods .

ETS auction revenues. The system currently generates billions of euros annually that EU member states use to finance clean industrial investments and social climate measures. Diluting the market would reduce this public revenue stream at precisely the moment it is most needed to support the transition .

Competitiveness in new strategic technologies. Europe aims to build global leadership in batteries, electrolysers, grid technologies, and clean energy production. These emerging sectors rely on a strong carbon price signal to outcompete incumbent, emissions-intensive technologies. Without it, the investment case erodes .

Regime credibility and the first-mover penalty. Ad hoc political interventions would "erode investment certainty" and penalise the very businesses—including SSAB, Outokumpu, and Heidelberg Materials—that have already committed significant capital to decarbonisation based on the existing policy framework. In effect, changing the rules mid-game punishes the early movers .

The real structural causes of Europe's competitiveness crisis

The investors, alongside more than 100 allied companies and industry groups, are emphatic that the ETS is not the cause of Europe's declining industrial competitiveness. They identify the following structural issues instead :

• High energy costs driven by fossil-fuel dependence. European industrial electricity prices are currently two to three times higher than those in the US and China, a gap that predates and has been worsened by the energy crisis . The root cause is structural reliance on imported fossil gas, not carbon pricing. The Draghi report on European competitiveness identified energy as a key driver of the EU's competitiveness gap as early as the 2000s .
• Underinvestment in grid and electrification infrastructure. Insufficient grid capacity, slow permitting processes, and a lack of transmission infrastructure are blocking the electrification of industry. These are the real bottlenecks preventing clean, affordable power from reaching factories .
• Regulatory fragmentation and slow permitting. Complex, slow, and inconsistent approval processes for clean energy and industrial projects remain a major barrier to deployment across the bloc .
• Global subsidy and trade asymmetries. Europe faces fierce competition from jurisdictions deploying large-scale industrial subsidies—such as the US Inflation Reduction Act and extensive Chinese state support—without comparable financial tools of its own .
• Lack of a dedicated clean-tech financing mechanism. The EU lacks a sufficiently scaled, easily accessible public financing vehicle to de-risk private investment in first-of-a-kind industrial decarbonisation projects. The investors argue that ETS revenues should be more strategically deployed to improve the bankability of these projects .

The coalition's diagnosis is succinct: "Instead of focusing on the structural causes of economic erosion—higher energy prices set by fossil gas, insufficient infrastructure, and slow permitting—some are wrongly targeting the ETS" .

The showdown at the June European Council summit and the subsequent July legislative review will determine whether the EU doubles down on its carbon market as the central pillar of industrial strategy or capitulates to political pressure to dismantle it. For the investors managing over €11 trillion, the answer is clear: evolve the carbon market, don't dismantle it—or risk watching the capital needed for Europe's clean industrial future flow elsewhere.