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Carbon Market Watch criticizes the EU ETS's free allocation of pollution permits, claiming it has generated over 25 billion euros in windfall profits and stalled industrial emissions cuts. The organization argues that the current approach fails to align with Paris climate goals and recommends a more rigorous impact assessment for the 2021-2030 carbon leakage list. Key recommendations include accounting for international climate policies (such as the Chinese and Californian ETS), focusing on direct emissions, and applying the precautionary principle to ensure only sectors at very high risk of carbon leakage receive free allowances.

Carbon Market Watch urges the European Commission to adopt the most ambitious options for the EU ETS aviation coverage, specifically advocating for full coverage of emissions and 100% auctioning of allowances from the regulation's adoption. The organization criticizes CORSIA as an ineffective climate strategy and warns that replacing EU ETS coverage with CORSIA would reduce climate ambition and revenue. Additionally, the document calls for the regulation of non-CO2 effects, which are estimated to multiply the global warming impact of aviation CO2 by 2-4 times.