In its latest report, Signal without response: Why the EU ETS needs resolve, not redesign, Allianz Economic Research argues that the core issue is not high carbon prices, but rather the lack of price predictability and insufficient complementary support to enable capital-intensive industries to undertake the necessary low-carbon transition.

“The core challenge is not that the ETS is too stringent, but that it has failed to provide the certainty and complementary support that capital-intensive industries require to commit to deep decarbonization,” the document states, adding that “the system requires not a redesign but the resolve to make it effective and predictable.”

The report explains that the mechanism has been more effective as a carbon-pricing tool in the power sector, whereas in industry—where emissions reductions are more costly—it has delivered more limited results. “Renewables have made decarbonization viable at prices below EUR50/tCO2, while industrial options such as green hydrogen and low-carbon steel carry abatement costs well in excess of EUR100/tCO2.”

It also warns that, at an EUA price of €65/tCO₂, the carbon cost embedded in industrial electricity prices can account for up to 9% in the most carbon-intensive power systems, placing a disproportionate burden on energy-intensive firms, where energy represents a larger share of overall costs.

According to the authors, the EU ETS needs targeted reform, with the establishment of a credible long-term price corridor highlighted as a central priority. “Publishing a transparent indicative price trajectory would materially reduce investment uncertainty and strengthen the carbon price as a basis for industrial decision-making,” the report concludes.