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The document analyzes the 2026 State of the European Union address, emphasizing that while the EU has made progress in clean electricity, it now faces a critical 'delivery' phase. It argues for a diverse energy mix including clean firm power, the acceleration of grid expansion to resolve connection bottlenecks, and the use of the Industrial Decarbonisation Bank to move projects to final investment decisions. Additionally, it stresses the importance of maintaining strong methane regulations and creating lead markets for low-carbon products to ensure industrial competitiveness and energy security.

The author contends that weakening the EU Emissions Trading System (ETS) would undermine the transition to an electric economy by removing the financial incentive for companies to shift from fossil fuels to clean electricity. While the Electrification Action Plan provides a target of 46% electrification by 2040, the author asserts that a strong carbon price is required to justify long-term investments in cleaner production and infrastructure. The text highlights a divide within the business community, noting that while some companies lobby for lower carbon costs, others—including SAP, Volvo Cars, and Schneider Electric—advocate for clear rules and faster electrification to reduce exposure to volatile fossil fuel markets.

The policy brief examines the 'cross-chain' risks in the carbon capture and storage (CCS) value chain, where delays in transport or storage infrastructure leave industrial emitters facing a 'double burden': the cost of capture equipment and continued EU ETS payments for uncaptured emissions. It contrasts the EU's current funding gaps with the UK's 'CCS business models' and suggests the EU utilize ETS revenues or the proposed Industrial Decarbonisation Bank to provide financial safeguards during infrastructure outages.

Carbon Market Watch asserts that free allowances in the EU ETS have failed to drive decarbonisation, instead allowing heavy industry to generate profits while avoiding pollution costs. The organization criticizes the European Commission's revision proposal for extending free allocations and calls for a full phase-out by 2034 for CBAM sectors and a plan for all other sectors, insisting that any remaining subsidies be tied to proven investments in zero-carbon transformation and social safeguards.

The report finds that while Poland has significant geological storage potential (estimated at 15 Gt) and industrial demand in hard-to-abate sectors like cement, the CCS sector remains pre-commercial due to regulatory uncertainty and a lack of revenue support. It identifies regulatory certainty and revenue adequacy as the most critical barriers to final investment decisions (FID). To address these, the report proposes a three-phase roadmap: establishing regulatory and financing foundations by 2027, initiating pre-commercial value chains by 2030, and expanding infrastructure for market scale-up thereafter. Key recommendations include adopting a national CCS strategy, implementing Carbon Contracts for Difference (CCfDs), and creating a digital 'one-stop shop' for permitting to align with Net Zero Industry Act (NZIA) requirements.

The We Mean Business Coalition supports the EU's Electrification Action Plan and its 46% electrification target for 2040, but warns that proposed changes to the Emissions Trading System (ETS)—specifically regarding the linear reduction factor, auctioning, and free allowances—could undermine investment signals and the overall transition to a clean industrial future.

The policy brief argues that the proposed €100 billion Industrial Decarbonisation Bank (IDB) must move beyond fragmented grants to a coordinated system of carbon contracts for difference (CCfDs), project development support, and shared infrastructure funding. It highlights a significant delivery gap in existing EU programs, noting that only 16 of 208 Innovation Fund grant agreements had entered operation by June 2025. To resolve this, the author recommends technology-neutral auctions with sector-specific caps, two-way CCfD settlements referenced to EU ETS prices, and the sequencing of infrastructure delivery to align with industrial final investment decisions (FID).

The report examines the EU's 2040 climate target, which allows up to 5% of the 90% net reduction goal to be met via high-quality international credits under Article 6 of the Paris Agreement from 2036 to 2040. It advocates for centralised purchasing—via the European Commission or a dedicated body—over decentralised Member State procurement to leverage bargaining power, pool expertise, and link purchases to strategic partnerships. The authors warn of significant delivery risks due to strict Article 6 temporal rules, long project lead times, and the increasing tendency of partner countries to retain mitigation benefits for their own NDCs. Key recommendations include a structured procurement timeline starting with Member State notifications by 2030, a calibration report by 2034, and the use of strategic over-procurement to hedge against supply shortfalls. The report explicitly advises against allowing these credits for direct compliance under the EU Emissions Trading System (EU ETS) to maintain the system's integrity.

The Clean Air Task Force (CATF) recommends a cautious, safeguard-driven integration of permanent carbon removals (specifically DACCS and BioCCS) into the EU ETS to avoid deterring direct emissions reductions. The briefing argues for expanding the ETS scope to include extra-EEA flights, vessels above 400 gross tonnage, and municipal waste incineration and landfills. It specifically highlights the need to address non-CO2 aviation impacts, such as contrails, through financial incentives and robust monitoring. To support the transition, CATF suggests earmarking aviation ETS revenues for sustainable aviation fuels (SAF) and maintaining SAF allowances beyond 2030.

The European Climate Neutrality Observatory (ECNO) reports that while the EU's transition to climate neutrality is accelerating overall, none of its 13 key building blocks are progressing at the required pace. Positive trends are noted in zero-emission vehicle registrations, heat pump sales, and poverty reduction in vulnerable regions. However, the report highlights critical failures in cleantech investment, financial flows, and nature-based carbon removal, while noting that some key policies, such as the 2035 zero emissions target for new cars and vans, have been weakened.

The briefing reports that a majority of citizens in several EU member states support requiring heavy industry to pay for CO2 emissions and favor investing carbon revenues into industrial decarbonisation over the continuation of free allowances. It highlights a contrast between public opinion and lobbying efforts by industry giants and certain member states to weaken EU ETS rules.

The Clean Air Task Force asserts that the EU ETS review is critical for bridging the cost gap between conventional jet fuel and sustainable aviation fuels (SAF). While ReFuelEU Aviation established demand, the author notes that no large-scale e-SAF project in the EU had reached a final investment decision as of mid-2026. The document recommends extending the SAF allowance mechanism beyond 2030, mandating the reinvestment of ETS aviation revenues into sector decarbonisation, and carefully integrating high-quality carbon removals into the long-term strategy.

The We Mean Business Coalition (WMBC) advocates for a coordinated EU framework to overcome barriers to electrification, such as high upfront costs and grid constraints. The coalition proposes a 50% electrification target by 2040 and suggests realigning financial incentives, modernising electricity grids, and mobilising public finance to de-risk private investment in clean energy technologies.

The EU petrochemical industry, a €635 billion sector employing 1.2 million people, is facing a deep structural crisis characterized by ageing assets, high energy costs, and intensifying global competition. The industry is physically organized around approximately 150 chemical parks, with the Antwerp-Rotterdam-Rhine-Ruhr corridor serving as the world's densest concentration of production. However, the EU's global market share in chemical sales fell from 21% in 2009 to 13% in 2024, while China now accounts for 46% of global sales. The sector is experiencing a 'closure wave' of steam crackers—the central units for producing ethylene, propylene, butadiene, and aromatics—due to their 1970s-era scale and high carbon exposure under the EU ETS. Between 2022 and 2025, the industry lost approximately 37 Mt of production capacity, and investment CAPEX dropped from €7.6 billion in 2022 to €1.5 billion in 2025. The report highlights acute vulnerabilities in the supply of primary 'building block' molecules, noting that the EU produces less than 10% of global primary petrochemical capacity and is increasingly dependent on imports for molecules like methanol, where domestic production covers less than 15% of consumption.

The EU's Carbon Border Adjustment Mechanism (CBAM) transitioned from a reporting-only phase to a definitive period on January 1, 2026, introducing financial liabilities for importers of iron, steel, aluminum, cement, fertilizers, electricity, and hydrogen. Exporters must now provide verified actual emissions data to avoid high default values, which include annual markups of +10% in 2026, +20% in 2027, and +30% from 2028 onward. Financial liability is calculated based on embedded emissions, adjusted by a Free Allocation Adjustment (FAA) that phases out by 2034, and monetized through CBAM certificates linked to EU ETS prices. The guide emphasizes that verified actual emissions and documentation of carbon prices paid in the country of origin are critical for maintaining competitiveness and reducing costs.

The document addresses the risk of 'over-inflated pressure from minority laggard interests' in EU policy debates, noting that trade association positions often do not reflect their broader membership. It highlights a growing trend of companies bypassing traditional associations to support climate-aligned policies through initiatives like Corporate Leaders Group Europe. The guide introduces the RPE Framework and tailored EU guidance to help businesses align their advocacy with their climate commitments, noting that 94% of business leaders in 2025 viewed stable net-zero policies as critical to investment.

Carbon Market Watch proposes that the EU replace 'net' climate targets with three distinct targets for emissions reductions, land-based sequestration, and permanent carbon dioxide removals (CDR). The guide argues that current EU governance is inadequate, noting that the Carbon Removal and Carbon Farming (CRCF) Regulation lacks rigour and the Net-Zero Industry Act's goal of 50 Mt of geological CO2 storage does not specify the volume for permanent removals. To implement this, the author suggests integrating permanent removal targets into the Effort Sharing Regulation and strengthening the Governance Regulation to require credible feasibility and sustainability assessments by March 2027. Proposed target designs include a 'floor' for minimum delivery and a 'ceiling' to prevent over-reliance on CDR, with targets expressed in absolute volume (MtCO2) and as a percentage of 1990 gross emissions. Financing should be shared between the public sector and high-polluting companies through progressive taxation or direct removal obligations.

The report analyzes the potential demand response to an EU ETS scope expansion for extra-EEA flights. It finds that demand effects are generally small at current price levels, particularly for high-emitting segments such as long-haul flights, business travel, and private aviation, which exhibit low price elasticity. The study highlights that cost pass-through rates are higher in competitive markets and at uncongested airports. Non-price factors, including value of time, airline loyalty, and airport attractiveness, are identified as primary drivers of the observed differences in price sensitivity across market segments.

The document outlines the Responsible Policy Engagement (RPE) Framework to help EU businesses align their direct and indirect advocacy with climate goals. It warns that legacy fossil fuel interests often dominate trade associations, creating a false impression of business consensus against climate policy. The guide provides a five-step process for companies—commit, engage, align trade orgs, allocate spending, and disclose—and offers specific recommendations for trade associations to be more representative and for EU policymakers to close transparency gaps, particularly within the European Council.

The report outlines a five-step strategy for the European Union to achieve energy sovereignty by transitioning away from fossil fuel imports, which currently account for nearly 60% of its primary energy supply. It emphasizes that 89% of final energy demand can be met through electrification using existing technologies, which would significantly lower exposure to supply shocks since 81% of electricity production is domestic. The document proposes specific actions: accelerating electrification, interconnecting the European power grid, deploying energy storage to replace gas for balancing, decarbonizing heavy industry, and using the EU Methane Regulation to phase out high-risk imports from suppliers like Russia and the United States. Financially, the report notes that EU clean energy investments reached approximately 346 billion euros in 2025, but argues that 1,500 billion euros per year are needed until 2050 to complete the transition.