Joint Letter from the Prime Ministers of Denmark, Finland, Portugal, Spain and Sweden on the EU Emissions Trading System

12th of March 2026
H.E. Mr. António Costa
President of the European Council
BRUSSELS

Dear President, dear António:

Ahead of the upcoming European Council, we, the Prime Ministers of Denmark, Finland, Portugal, Spain and Sweden want to underline our commitment to meet our climate goals and decarbonise our economies.

Climate ambition is a foundation for competitiveness. Europe’s limited access to fossil resources and its exposure to geopolitical pressures make decarbonisation an economic imperative. Reducing our dependence on fossil fuels strengthens our resilience, lowers structural energy costs, and enhances our autonomy. At the same time, the clean energy transition is already emerging as a major driver of growth; in 2023, clean energy accounted for nearly one third of the EU’s total GDP growth. Our countries have demonstrated that fossil free energy can deliver lower prices and greater stability. Decarbonisation is therefore not only a climate strategy; it is a competitiveness strategy. It is the path through which Europe can reindustrialise on the basis of secure, affordable, and domestically produced clean energy.

The EU Emissions Trading System is the cornerstone of Europe’s climate and industrial strategy - The ETS remains our most effective and efficient instrument for reducing emissions and guiding investment. Over two decades, it has evolved into a stable and predictable market that provides the long-term price signals needed to mobilise capital, modernise production processes, and accelerate the deployment of clean technologies. Robust carbon pricing is indispensable for Europe’s industrial transformation. It supports electrification, fossil-free energy expansion, innovation in clean technologies, and the development of strategic value chains. Revenues from the auctioning of allowances are essential for financing this transition.

Attempts to weaken, suspend, or narrow the ETS would undermine investor confidence, penalise early movers, distort the level playing field, and slow the transformation of our economies. A progressive phase-out of free allocation is imperative to ensure incentives for the industry to transition and decarbonise the economy while preserving its competitiveness. This must be combined with
an effective CBAM to avoid carbon leakage. Technical adjustments to reduce volatility may be appropriate, but they must not compromise the integrity or predictability of the system.

The upcoming European Council provides a crucial opportunity to reaffirm our collective commitment to climate ambition and to the instruments that make it possible. A strong, predictable, and integrated climate energy framework, anchored in a robust ETS and combined with our competitiveness efforts, is essential for Europe’s future. We trust that our conclusions will reflect this vision and set the course for decisive action in the months ahead.

Kind regards,

Prime Minister of Denmark
Mette Frederiksen

Prime Minister of Finland
Petteri Orpo

Prime Minister of Portugal
Luis Montenegro

President of the Government of Spain
Pedro Sánchez

Prime Minister of Sweden
Ulf Kristersson

C/c. H.E. Mrs. Ursula von der Leyen, President of the European Commission.