The EU built its carbon market to make CO2 cost more.
That is now the part some EU states want to change. Poland is leading the push as energy prices climb again.
Why Poland Is The Most Exposed
The EU has a carbon market. It is called the Emissions Trading System, or ETS for short.
Power plants and big firms have to buy permits. The permits cover the CO2 they put out.
Some permits are still given out for free. Those go to firms that compete with cheap imports.
Poland gets about half its power from coal. That makes Poland the most exposed EU state to any tightening of ETS rules.
Tusk and other Polish lawmakers want free permits to keep running past 2034. They also want the 2028 phase-out slowed.
They got nine other EU governments to co-sign a letter. The letter went to the EU Council and the EU Commission.
The co-signers were Austria, Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Italy, Romania, and Slovakia.
If you want to see how Europe's energy fight feeds back into US stocks, Market Briefs covers it each morning. A free investing class comes with sign-up.
What The Letter Asks For
The letter targets two parts of the carbon system:
- ETS1. The main system, covering power and big firms, where the group wants the free permit phase-out delayed.
- ETS2. The 2028 add-on. It puts a carbon price on heating fuels and gas for cars. Those costs land on homes.
The group also wants a stronger backup tool. That tool is called the Market Stability Reserve. It pulls permits from the market when prices jump.
Tusk said in public that he has Brussels "starting to speak Poland's language" on softening the ETS.
The Commission has said it got the letter.
Carbon permits trade like other commodities.
What Investors Are Watching
The Commission puts out its reform plan in July, with final adoption set for the first quarter of 2027.
Two prices to track:
- EU carbon permit prices. A softer phase-out tends to pull them down.
- EU utility and heavy industry stocks. Cheaper permits flow to their bottom line.
Names with high carbon use - cement, steel, and chemicals - have the most to gain from any reform that keeps permits cheap.
A market built to raise the cost of carbon is being redone in part because its own states say the cost is too high.
EU carbon prices are at a year high. Power bills in Poland and Czechia have risen too. That mix is what is forcing the rethink.
Free permits soften the cost for big factories. They have been a key part of EU climate plans since 2005.
Polish leaders say the shift to ETS2 is too fast. They want more time to plan and build out cleaner power. For now, the talks have moved in Poland's way.
Other big EU states are watching the result closely.
For sharper reads on how policy moves like this hit markets, join Market Briefs. A 45-minute investing class is included with sign-up.
