20 February, 2026

There’s a technical economics debate rumbling in Brussels that could have outsized consequences for Europe’s decarbonisation prospects. EU leaders are clashing over carbon pricing ahead of a critical review of the EU’s flagship climate policy, the Emissions Trading System (ETS). 

The purpose of the ETS is very simple: by putting a price on carbon, it forces polluters to account for the environmental cost of their emissions. Since its launch in 2005, it has helped drive emissions from power generation and heavy industry down by 50%, while channelling billions into clean investment. The EU is now reviewing whether and how to tighten and expand the ETS to align with its long-term climate targets. 

Not everyone is happy about the change. Many EU nations that rely on industry are arguing that high carbon prices are straining their industries and harming competitiveness, particularly as global rivals face weaker constraints.  

Yet this is exactly what the carbon pricing mechanism is designed to do: make pollution expensive. This is a textbook conflict between short-term economic comfort and long-term environmental outcomes. The pain of rising prices is felt immediately, while the benefits of decarbonisation arrive largely in the future. 

But, as recent analysis of the UK’s net zero transition by the energy system operator shows, the fastest net zero pathway is the cheapest one. It won’t all be smooth sailing but the lesson for businesses is clear: decarbonisation requires upfront investment and the real cost lies not in acting, but in delaying. 

By Patrick Bapty