What the 2026 ETS Review Means for Transport

# What the 2026 ETS Review Means for Transport

The European Union faces a decision point in 2026 that will reshape how it prices carbon emissions from vehicles, ships, and planes. The scheduled review of the EU Emissions Trading System (EU ETS) offers Brussels an opportunity to expand the bloc's most powerful climate policy tool into transport, a sector responsible for roughly 27% of EU greenhouse gas emissions yet still largely outside the system's scope.

Since 2005, the EU ETS has functioned as Europe's cornerstone climate policy. The system caps total emissions from power plants, industrial facilities, and aviation operations, then allows companies to trade permits for the right to emit carbon dioxide. This creates a price signal: pollute more, pay more. The mechanism has driven emissions reductions in covered sectors. Power generation emissions fell 35% between 2005 and 2022, according to EU data, while industrial emissions dropped roughly 27% over the same period.

Transport remains the weak link. Aviation entered the EU ETS in 2012, albeit with free allowances that cushioned the impact. Maritime shipping still lacks a comparable system, though the EU has proposed its own carbon pricing mechanism for shipping scheduled to begin in 2027. Road transport, which accounts for 72% of transport emissions, sits entirely outside the EU ETS framework. Instead, the EU relies on fuel consumption standards for cars and trucks, rules that set efficiency targets but do not directly price carbon.

The 2026 review presents three major possibilities. First, the EU could extend the EU ETS directly to road transport, forcing fuel suppliers or vehicle manufacturers to purchase allowances based on tailpipe emissions. Second, the bloc could create a parallel carbon market for transport modeled on the existing ETS architecture. Third, the EU could maintain the current approach and strengthen fuel consumption regulations instead.

Expanding the EU ETS into transport carries economic and political risks. Road transport touches every household and business. Trucking firms operate on thin margins. Extending carbon pricing to diesel and petrol would raise fuel costs unless offset by complementary policies like subsidies for electric vehicles or revenue recycling to lower-income households. France and Poland have expressed concern that transport inclusion could harm rural economies and competitiveness.

Yet the case for inclusion grows stronger as transport emissions resist decline. While power and industry cut emissions, transport emissions in 2022 remained nearly 1% above 1990 levels, according to EU figures. Fuel consumption standards have improved vehicle efficiency, but gains are offset by rising vehicle sales and driving patterns. A direct carbon price would create faster incentives for electrification and mode shift toward rail and public transport.

The 2026 review also intersects with other EU climate proposals. The Carbon Border Adjustment Mechanism, implemented in 2024, taxes carbon-intensive imports. Extending the ETS to transport could raise competitiveness concerns for European logistics operators competing against imports. The EU will also navigate pressure from member states dependent on fuel tax revenue and from the transport industry lobbying against new costs.

Industry groups and environmental organizations will clash over the next two years. The European Environmental Bureau and Transport and Environment, an advocacy group, favor ETS expansion as essential to meeting EU climate targets. The European Automobile Manufacturers Association and logistics associations warn that rapid carbon pricing could disrupt supply chains.

The review outcome will determine whether Europe closes a major loophole in its climate policy or reinforces a slower, technology-focused pathway for transport decarbonization.