EU must balance energy costs and climate goals in emissions reform

The European Union faces a critical challenge in reforming its emissions trading system (EU ETS) to simultaneously ensure economic competitiveness and drive further decarbonization. The proposed reforms, alongside the European Electrification Action Plan, aim to reduce the EU's significant dependence on imported fossil fuels, which stood at 87.6% for natural gas in 2025, exposing the bloc to geopolitical and price risks. The EU has set an ambitious target of 46% electrification by 2040, but progress has stagnated for a decade, with the share of electricity in final energy consumption averaging only around 23% across the bloc. Poland lags behind at approximately 17%.

A major obstacle to electrification is the uncompetitive price of electricity in Europe. Emission allowances remain a substantial component of electricity costs, particularly in Poland where they account for 40-50% of consumer bills, compared to an EU average of about 10%. Gas-fired power plants are expected to continue playing a crucial role in stabilizing the grid, even as renewable energy sources grow. These plants often set market prices, and their full decarbonization is a complex, long-term process due to slow progress in green hydrogen and biomethane development. The EU's proposed increase in the supply of emission allowances, extending availability to around 2047, aims to address some of these cost pressures, but the linear reduction factor remains a point of discussion.