2026 will see a review of the EU Emissions Trading System for maritime, aviation and stationary installations (EU ETS) Directive, including the Market Stability Reserve (MSR) Decision. Other key developments to be considered include the gradual phase-out of free allocation and the implementation of the Carbon Border Adjustment Mechanism (CBAM), while uncertainties around ETS2 implementation, possible consideration of integration of International Credits to cover up to 5% of emission reductions, potential inclusion of CDRs, and the potential inclusion of agriculture in ETS or similar systems raise the question of how much the ETS will be affected and what issues will stem from them. Furthermore, while the ETS effectively incentivizes decarbonization on the supply side, it does not provide incentives for demand for low carbon products.

The review aims to evaluate whether the current design of the ETS and the MSR remains effective and fit for purpose under these conditions.

The European Commission is conducting the review in the third quarter of 2026 through an evaluation and impact assessment process supported by stakeholder consultation.