Brussels, (Unib Rashid) — The European Commission on Wednesday unveiled a comprehensive Electrification Action Plan alongside a major review of the EU Emissions Trading System (EU ETS), aiming to strengthen Europe’s industrial competitiveness, accelerate decarbonisation, and reduce the bloc’s dependence on imported fossil fuels.

The new strategy is designed to position Europe as the world’s first electro-powered continent by accelerating the transition to clean electricity across industry, transport and buildings while reinforcing the EU’s carbon market to support investment in low-carbon technologies.

Announcing the package, the Commission said Europe’s dependence on imported fossil fuels has repeatedly exposed the continent to geopolitical shocks and volatile energy prices, undermining both businesses and households. Although around 70 percent of the EU’s electricity is now generated from domestic clean energy sources, the electrification of energy demand has remained stagnant at 23 percent over the past decade.

To reverse this trend, the Commission will assess an indicative target of 46 percent electrification by 2040 as part of the post-2030 Energy Union framework. According to the Commission, achieving this goal could reduce the EU’s annual fossil fuel import bill by €260 billion by 2040 while improving energy security, lowering electricity costs and enhancing industrial competitiveness.

European Commission President Ursula von der Leyen described the initiative as a major step towards strengthening Europe’s economic resilience.

“The best way to reduce Europe’s fossil energy dependency is to power our economy with electricity from clean, homegrown sources,” she said, adding that the package represents both an investment strategy and an independence plan that will support industry while keeping Europe’s clean transition on track.

EU Carbon Market to Be Modernised

The Commission also proposed significant reforms to the EU Emissions Trading System (ETS), the bloc’s flagship carbon pricing mechanism introduced in 2005.

The revised ETS aims to provide greater flexibility for European industries while maintaining the EU’s climate ambitions. The proposal introduces a more gradual emissions reduction pathway for 2031–2040 and allows limited use of high-quality international carbon credits during the later years of the decade to ease the transition for industries facing greater decarbonisation challenges.

A central element of the reform is the creation of an Industrial Decarbonisation Bank, backed by €100 billion to finance large-scale industrial decarbonisation projects across Europe. Member states will also be required to allocate 50 percent of national ETS revenues to investments supporting cleaner industrial production and emissions reduction.

The Commission further proposed strengthening the Innovation Fund and Modernisation Fund, extending support for lower-income member states while continuing incentives for companies investing in cleaner technologies.

The revised framework also includes measures to integrate permanent carbon removals into the ETS, reform the Market Stability Reserve to improve market predictability, and strengthen emissions trading rules for aviation, maritime transport and waste incineration.

Lower Electricity Costs and Faster Electrification

The Electrification Action Plan seeks to make electricity more affordable and attractive than fossil fuels by reducing the price gap between electricity and gas.

The Commission noted that electric vehicles can reduce driving costs by up to 78 percent compared with conventional fossil-fuel vehicles, while replacing gas boilers with heat pumps can lower household heating bills by as much as 60 percent.

To encourage wider adoption, the Commission proposed allowing member states to reduce electricity network charges and taxes for selected consumers and energy-intensive industries. It also called for accelerated deployment of smart electricity meters and measures to ensure electricity is not taxed more heavily than natural gas.

Additional financial support will be made available through instruments including the Social Climate Fund, the Industrial Decarbonisation Bank and new financing mechanisms to lower the upfront costs of heat pumps, electric vehicles, batteries and other clean technologies.

Investment in Grids and Clean Technologies

Recognising that stronger electricity networks are essential for the transition, the Commission reiterated the importance of rapidly expanding and modernising Europe’s electricity grids. It urged swift adoption of the proposed Grids Package, which is intended to reduce connection delays, improve grid efficiency and facilitate the integration of renewable energy.

The Commission also pledged support for investment in clean technology manufacturing, workforce training and innovation, arguing that widespread electrification could create hundreds of thousands of skilled jobs while strengthening Europe’s long-term industrial competitiveness.

The proposals will now be considered by the European Parliament and EU member states as part of the bloc’s legislative process.