Beyza Binnur Donmez
17 July 2026•Update: 17 July 2026
The European Commission unveiled an Electrification Action Plan and proposed reforms to the EU Emissions Trading System (ETS) on Friday to strengthen the bloc's competitiveness, reduce dependence on imported fossil fuels and accelerate industrial decarbonization.
The proposals aim to increase electrification across industry, transport and buildings while modernizing the bloc's carbon market to encourage investment and provide greater support for European manufacturers facing mounting economic and geopolitical pressures.
The commission said it would assess an indicative target of raising the EU's electrification rate to 46% by 2040 as part of its post-2030 Energy Union package. It estimated the goal could reduce the bloc's annual fossil fuel import bill by €260 billion (over $297 billion) by 2040.
Under the proposed ETS overhaul, the commission plans to establish a €100 billion Industrial Decarbonization Bank to support clean industrial investments across Europe. Member states would also be required to reinvest 50% of their national ETS revenues in decarbonizing sectors covered by the carbon market.
The proposed review would maintain free emissions allowances for industry beyond 2030 while linking them more closely to investments in decarbonization.
The commission also proposed integrating permanent carbon removals into the ETS, extending the system to waste incineration, strengthening provisions for aviation and maritime transport, and reforming the Market Stability Reserve to improve market predictability.
The Electrification Action Plan also proposes measures to narrow the price gap between electricity and fossil fuels by allowing member states to reduce network charges for certain consumers and lower taxes for energy-intensive industries.
Additional measures include accelerating smart meter deployment, supporting heat pumps, electric vehicles and batteries, and speeding up electricity grid expansion.
"The best way to reduce Europe's fossil energy dependency is to power our economy with electricity from clean, homegrown sources," European Commission President Ursula von der Leyen said. "Today we are proposing to make Europe the world's first electro-powered continent."
