The European Union (EU) Emissions Trading Scheme (ETS) carbon price took a tumble this week following comments suggesting a rethink by German Chancellor Friedrich Merz. Minds have been focused by the start of the Cross Border Adjustment Mechanism (CBAM) in January 2026, high energy prices and poor growth. The challenge is now on in the lead up to the next proposals to update the EU ETS, expected by July 2026.
As the abrupt change in the carbon price shows, words have power. Especially from prominent politicians. So, when former President Barack Obama told a podcast host this week that aliens were real, the world took notice. Obama subsequently clarified, with some exasperation, that he had responded to a light-hearted question in kind with his belief. Similarly, when Merz said last week that the EU’s carbon market should be revised or delayed, the markets took note. The ETS carbon price fell by 12% from €79/t on 11 February 2026 to €69/t on 16 February 2026. The share prices of large Europe-based cement producers such as Holcim and Heidelberg Materials also fell.
Merz’s speech to the European Industry Summit in Antwerp on 11 February 2026 called for the EU to become competitive again. He noted that the economy had grown by 8% in China in recent years, by 2% in the US and only 1% in the EU. His remedy is to reduce bureaucracy, promote a common European legal framework to make trans-national business easier, improve the common energy market to reduce energy prices, cut AI regulations in and make ‘better’ merger rules. However, all of these well-signposted measures paled in comparison to comments Merz made on a panel at the event about the possibility of changing the ETS. His words were also similar to those of Italy’s Prime Minister Giorgia Meloni, who told reporters last week that the EU needed to review the ETS.
Meanwhile, across the channel in the UK, the government launched its second consultation on its CBAM. The British version is set to start in 2027 and exactly the same kind of arguments and counter-arguments are popping up as in the run up to the EU CBAM. The UK’s Mineral Products Association (MPA) has been lobbying to make sure that the scheme doesn’t hurt the local cement and concrete sectors. Cue familiar issues such as time to test the new system, clarity on the default values importers will pay when emissions can’t be verified, protection for local manufacturers… and so on.
Carbon taxes like the EU ETS are political instruments. They require certainty that they will persist for years or decades before companies will make investments in response to them. So, if the heads of some of the largest economies within the EU start to publicly question the viability of the ETS, why should anyone take it seriously, much less open up the cheque book to build fancy untested technologies such as carbon capture plants!? Naturally, European Commission President Ursula von der Leyen defended the scheme at the Antwerp event. She argued that decarbonisation has been possible in tandem with economic growth over the longer term. It is likely to have been a tough crowd, given that she was making this point at a conference about industrial competitiveness in Europe.
The most likely amendment to the ETS being touted in the press may be an extension of the free allocation system beyond the mid-2030s. Or, in other words, a brake could be imposed on how fast the cost of the carbon tax mounts up for protected industries such as cement. This would also effectively restrict more expensive forms of sustainability such as carbon capture to projects funded by governments, unless there was a step-change in the technology, CO2 transport infrastructure and so on. All the talk by industry in the run-up to the CBAM was about stopping an external leak of the system and exposing local industry to ‘unfair’ imports. At the moment it looks like the actual leak will come from within. At which point, accusations about carbon taxes merely being a form of economic protectionism seem more credible.
