Commission outlines measures to strengthen Europe’s banking sector and support growth
The European Commission today adopted a Communication on the competitiveness of the EU banking sector, setting out measures to strengthen the Single Market for banking.
President of the European Commission Ursula von der Leyen said: “Getting capital flowing is how we will get Europe growing. Our Savings and Investments Union needs a strong, competitive banking sector at its heart. And today’s Communication takes a clear step in this direction, recalibrating our approach to risk, and enabling growth and innovation while maintaining financial stability.’
The objective is to build a more integrated, efficient, and competitive banking sector that can strengthen Europe’s economy by financing growth, innovation, and strategic priorities, underpinned by a better-balanced regulatory framework, creating the conditions for banks to take prudent risks while safeguarding the sector’s resilience, delivering better services to households and businesses, all while preserving financial stability and fostering sustainable growth.
This Communication is a key pillar of the Commission’s Savings and Investments Union (SIU) strategy: having a banking sector with the strength and scale to finance growth and strategic priorities, such as innovation, the clean transition, and defence, while delivering high-quality financial services to households and businesses.
Following a public consultation and exchanges with Member States, stakeholders, and supervisory authorities, the Commission has identified three main challenges that limit the banking sector’s ability to support the EU economy effectively.
First, the sector remains too fragmented along national lines. This prevents EU banks from scaling up and competing globally in key market segments and finding efficiencies across borders. Second, the way international banking standards, known as Basel III standards, are transposed into the EU framework does not always reflect the specific features of the EU banking landscape. The framework needs to work better for both large and small banks. Third, some parts of the EU regulatory framework, including the interaction between microprudential, macroprudential and resolution rules, as well as reporting requirements, are too complex and burdensome and should be simplified. Addressing these three challenges is essential to building a banking sector that is not only resilient and competitive, but also able to support the EU economy.
Boosting competitiveness calls for a cultural shift in banking towards responsible, measured risk-taking. Simplifying the regulatory framework, integrating the Single Market and completing the Banking Union would help EU citizens and businesses access better products and services at more competitive prices.
Key measures
The Communication identifies key measures that are built around three objectives.
First: removing barriers to cross-border banking activity and fostering market integration. Today’s Communication sets out the path towards reducing prudential and non-prudential barriers to cross-border activity so that EU banks can reach the scale required to compete globally. This would include the following measures:
Allowing cross-border banking groups to use capital and liquidity more efficiently across the EU: this would allow groups to redirect excess funds to where they can be more productive without hampering their capacity to finance local economies, and without prejudice to financial stability across the Single Market and in each Member State.
Strengthening common safeguards: the Commission will seek to increase trust in the financial system and among supervisors by proposing a simpler and more effective common deposit protection mechanism in the Banking Union. This would replace the 2015 European Deposit Insurance Scheme proposal and build on existing central and national safety nets, which are now fully funded.
Closer monitoring of EU anti-money laundering and consumer protection frameworks and their national implementation: this would make it easier for banks to offer services across borders.
Second: implementing international standards while taking into account EU specificities and proportionality. The EU remains committed to applying international standards while better reflecting the specificities of the EU banking sector. To preserve the international level playing field and support EU banks to compete globally, the measures set out in the Communication include:
Re-assessing how the EU implements certain international standards, which may be in some cases limiting the lending capacity of EU banks.
Possible revisions of certain prudential and corporate governance rules to better reflect EU banks’ specificities in relation to banks’ size, business models, and activities.
Finally: the regulatory framework for banks should be simplified as part of the Commission’s wider objective of reducing administrative burden. Trust in the banking system depends on strong safeguards, but unnecessary complexity should be reduced and requirements made more predictable and transparent for banks and authorities alike. In particular, the Communication highlights:
Simplifying the capital stack and further harmonising banks’ macroprudential buffers.
Standardising and streamlining resolution capital requirements and processes.
Adjusting the criteria and thresholds for ‘small and non-complex institutions’ and adapting their requirements.
Next steps
The Commission has sought stakeholder feedback, and respondents are welcome to submit views or comments in the months to come. The Commission will propose in the first quarter of 2027 a package of measures to amend the banking regulatory framework and deliver on this Communication, in line with the objectives of the One Europe, One Market roadmap. In parallel, the Communication calls on Member States, supervisory authorities, and the banking industry to continue their own efforts to improve bank competitiveness.
Background
The SIU strategy aims to improve how the EU financial system channels savings into productive investment. It envisages an efficient and integrated banking sector based on a single rulebook and a completed Banking Union. The strategy is aligned with the EU’s Competitiveness Compass, developed in response to the recommendations of the Letta and Draghi reports; the Single Market Strategy; and the One Europe, One Market roadmap.
For more information
Questions and Answers
Communication
Staff Working Document
Summary of the Targeted Consultation
Summary of the Call for Evidence
Quote(s)
Getting capital flowing is how we will get Europe growing. Our Savings and Investments Union needs a strong, competitive banking sector at its heart. And today’s Communication takes a clear step in this direction, recalibrating our approach to risk, and enabling growth and innovation while maintaining financial stability.
Ursula von der Leyen, President of the European Commission
Today, as part of the Savings and Investments Union strategy, we set out a clear path to a more integrated, efficient and competitive banking sector. Simplifying rules and making them more proportionate matters, but it will not be enough. EU banks need the right conditions to scale up, consolidate and compete globally. That means removing barriers in the single market for banking and completing the Banking Union. The challenges are clear. Now we need the collective determination to act.
Maria Luís Albuquerque, Commissioner for Financial Services and the Savings and Investments Union
Commission launches EU-Ukraine Drone Alliance to boost drone and counter-drone technology
The European Commission officially launched the EU-Ukraine Drone Alliance during the third EU-Ukraine Defence Industry Forum in Kyiv. The Alliance will help the EU and Ukraine work more closely on developing and using drones and systems to stop hostile drones. It is part of wider EU efforts to strengthen Europe’s defence in this fast-changing area.
The Alliance brings together companies, start-ups, researchers, armed forces and other users from EU countries and Ukraine. Its main goal is to help improve the security of both the EU and Ukraine by supporting a strong drone industry, encouraging the development of new drone and counter-drone technologies, and helping build Europe’s overall capacity in this area.
The Alliance begins to implement the Drone Deal, announced by President Ursula von der Leyen in Kyiv on Wednesday 15 July. Its objective is to build joint ventures between Ukrainian and European companies, and to accelerate the development and production of next-generation drones and counter-drone systems. By doing so, it will help ensure that Ukraine has the capabilities it needs today, while strengthening Europe’s defence readiness for the future.
The Commission is now preparing the first meeting of the 18 founding members scheduled to take place in Brussels in September.
These founding members, selected following an open call for expression of interest, include ORQA d.o.o., Indra Group, Fincantieri, WB Electronics/WB Group, Destinus, Delair, RSI Europe, TERMA A/S, Quantum Systems from EU Member States. Selected Ukrainian members are LLC Skyfall Industries, LLC Greentech Harvest, LLC Tencore, LLC Deviro, LLC Vyriy Industry, Scientific production Company ‘ATHLON AVIA’ LLC, LLC TEHAVTOFART PIVDEN” (TAF Industries), UFORCE and F-Drones.
Background
The EU-Ukraine Drone Alliance was first announced by President von der Leyen in her State of the European Union speech in 2025 to foster an innovative defence drone-industrial ecosystem. It is a key deliverable of the Joint Communication Preserving Peace – Defence Readiness Roadmap 2030, published in October 2025, and of the Communication on the Action Plan on Drone and Counter Drone Security of February 2026.
The announcement follows the selection of the 18 founding members, including both EU and Ukrainian companies, based on a call for expressions of interest. The application deadline was 25 May 2026.
For More Information
EU Defence Industry Transformation Roadmap
Action plan on Drone and Counter-Drone Security
Call for Founding Members of the EU-Ukraine Drone Alliance
Quote(s)
Without any delay, we start to implement recently announced ‘EU-Ukraine Drone Deal’. EU and Ukraine drone and counter-drone producers will start their work to jointly amplify our efforts in drone development segment. As Russia is scaling up its drone production volumes, we should augment our joint efforts as well.
Andrius Kubilius, Commissioner for Defence and Space
2026 Rule of Law Report strengthens Europe’s prosperity, security and democratic resilience
Today, the European Commission published its seventh annual Rule of Law Report, assessing the state of the rule of law across all EU Member States, as well as four candidate countries: Albania, Montenegro, North Macedonia and Serbia.
The rule of law underpins Europe’s prosperity, democracy and security. Independent justice systems, effective anti-corruption frameworks, free and pluralistic media, and strong checks and balances protect citizens’ rights and sustain trust in public institutions and democracy. They provide the legal certainty that supports investment, competitiveness, and economic growth.
Ursula von der Leyen, President of the European Commission, said: ‘The rule of law builds trust. Trust among citizens. Trust for businesses. It is what makes Europe the best and safest place to live and invest. This year’s Report shows continued positive progress across many Member States. And that is precisely why our Rule of Law Report matters. It has become a reference point, helping to shape national debates and drive reforms across our Union.’
Over time, the Report has become an established tool for engaging in dialogue with Member States on key issues related to the rule of law. Its recommendations are a driver for reform in Member States.
This year’s Report confirms a broadly positive trajectory, showing continued progress in many Member States, with significant reforms completed or underway across all areas monitored under the report. While the picture is uneven across Member States and policy areas and some challenges persist, the Report and its recommendations continue to drive reform and change through sustained engagement with Member States.
In the Commission’s proposal for the next EU’s long-term budget. the Report and its recommendation will also play an important role to help ensure that strong safeguards are in place for the protection of the Union’s budget. In particular, the Commission has proposed that the new National and Regional Partnership Plans (NRPPs) within the MFF should address challenges identified in the Rule of Law Report. The Report will also be one of the sources of information for the Commission’s assessment of Member States’ respect of the Charter and horizontal conditions on the rule of law in the implementation of the NRP Plans.
Equal and fair treatment of Member States, a clear and consistent application of EU standards, and a dialogue-based process are the underlying principles of the Rule of Law Report that will continue to guide the Commission’s work with Member States.
Key findings this year:
Justice systems
Many Member States have advanced on justice reforms over the past year. Positive measures include strengthening the independence of Councils for the Judiciary, additional safeguards for judges’ appointments and disciplinary procedures, and strengthening the autonomy of prosecution services. Reforms are however progressing at a slower pace in some Member States, and serious concerns remain in certain cases. In most enlargement countries, efforts to implement judicial reforms continued, while concerns persisted regarding undue influence hampering judicial independence.
Anti-corruption frameworks
The Directive on combatting corruption, which entered into force on 31 May 2026, establishes a modern and harmonised framework to prevent, detect and sanction corruption in the EU. The Commission is supporting Member States in their transposition efforts and to further improve their anti-corruption frameworks. As this year’s Rule of Law Report shows, several Member States have developed new anti-corruption strategies and strengthened their institutional capacity to fight corruption. At the same time, further action is needed to strengthen preventive frameworks, such as those related to lobbying and conflicts of interest, as well as to ensure the effective investigation, prosecution and final judgments in corruption cases. In most enlargement countries covered in the Report, legal and institutional frameworks were strengthened, while the investigation, prosecution and adjudication of corruption cases need to be further improved.
Media freedom and pluralism
Reforms are under way in Member States to align their national laws with the European Media Freedom Act (EMFA). Several Member States are undertaking reforms to strengthen the independent functioning and financing of public service media, as well as fairness and transparency in the allocation of state advertising. With EMFA providing for binding legislation on several media freedom topics, the Rule of Law Report no longer includes recommendations on those aspects. They are being followed up on as part of the Commission’s enforcement of EMFA. Furthermore, increased attention is being given to improve the safety and protection of journalists from continuing threats. The Commission will continue to support a stronger enabling environment and safety for journalists and for quality newsreporting, including by updating its Recommendation on the safety of journalists. Many Member States are taking concrete steps to address the phenomenon of Strategic Lawsuits Against Public Participation (the so-called SLAPPs), and the Commission continues working with them to support the transposition and implementation of the anti-SLAPP Directive. In most enlargement countries covered in the Report, appointments made to governance structures of public service media and media regulators have increased their stability, while concerns persist over media market concentration and the editorial independence of public broadcasters.
Institutional checks and balances
Reforms to improve legal certainty and legislative quality have been taken forward. In some Member States, shortcomings persist regarding the excessive use of emergency legislative procedures and the lack of stakeholder involvement. The Report finds that many Member States continue to ensure an enabling and supportive framework for civil society, and sustain efforts to further improve their operating environment. However, civil society actors continue to report challenges in a number of Member States, including limitations to funding and peaceful assembly. In the enlargement countries covered in the Report, institutions upholding checks and balances can generally perform their functions, while some challenges persist, for example in ensuring an enabling environment for civil society.
Single Market dimension
Across the four pillars, the Report emphasises the impact of the rule of law for the functioning of the Single Market and the operating environment for businesses. For example, the Report provides information on the specialisation of courts and judges to handle commercial cases; measures to prevent corruption in public procurement; investment protection; and the stable regulatory environment necessary for business to operate in predictable conditions.
Next steps
The Commission invites the European Parliament and the Council of the EU to continue general and country-specific debates based on the report and its recommendations. It also encourages national parliaments, civil society and other stakeholders to continue the dialogue at both national and European level.
The Commission calls on Member States to address the challenges identified in the Report, and stands ready to support the implementation of the recommendations. For the enlargement countries covered in the Report, the Commission will follow up on the issues identified, including in its next annual reports on enlargement. As announced by President of the European Commission, Ursula von der Leyen, in her Political Guidelines 2024 – 2029, other accession countries will be included in the Rule of Law Report as and when they are ready.
Background
The annual Rule of Law Report is the result of close dialogue with national authorities and stakeholders. The Report covers all Member States and four enlargement countries on the basis of the same objective and transparent methodology, examining the same set of issues in each country.
The 2026 Report consists of a Communication examining the situation in the EU as a whole and 27 country chapters looking at significant developments in each Member State. The Report assesses the implementation of last year’s recommendations to the Member States, and, on that basis, provides another set of specific recommendations. The Rule of Law Report also covers four country chapters looking at developments in Albania, Montenegro, North Macedonia and Serbia since the 2024 Rule of Law Report. This supports the reform efforts made by these countries to achieve progress on democracy and the rule of law ahead of accession, and to guarantee lasting high standards after accession.
The Rule of Law Report sits at the centre of the annual Rule of Law Cycle. This yearly cycle is preventive: it serves to promote the rule of law and aims to prevent the emergence or deepening of problems. It is separate from the other elements in the EU’s Rule of Law Toolbox and complements – but does not replace – the Treaty-based mechanisms allowing the EU to respond to rule of law-related issues in the Member States. These tools include infringement proceedings and the procedure to protect the founding values of the Union under Article 7 of the Treaty on European Union.
For more information
2026 Rule of Law Report
2026 Rule of Law Report – the rule of law situation in the European Union
2026 Rule of Law Report – Recommendations
2026 Rule of Law Report – Country Chapters
2026 Rule of Law Report – Country Chapter Abstracts and Recommendations
2026 Rule of Law Report – Country-specific institutional background
2026 Rule of Law Report – Methodology
2026 Rule of Law Report – Questions and Answers
The Annual Rule of Law Cycle – Factsheet
The EU’s Rule of Law Toolbox – Factsheet
Flash Eurobarometer 584 on EU challenges and priorities
Quote(s)
The rule of law builds trust. Trust among citizens. Trust for businesses. It is what makes Europe the best and safest place to live and invest. This year’s Report shows continued positive progress across many Member States. And that is precisely why our Rule of Law Report matters. It has become a reference point, helping to shape national debates and drive reforms across our Union.
Ursula von der Leyen, President of the European Commission
The rule of law lies at the core of Europe’s resilience, empowering citizens and boosting our competitiveness. I am satisfied to see that the Report continues to foster concrete reforms, testament to our close dialogue and cooperation with the Member States.
Henna Virkkunen, Executive Vice-President for Tech Sovereignty, Security and Democracy
As we present the seventh edition of our Rule of Law Report, we reaffirm a fundamental truth: the rule of law is the foundation of a fair, democratic and prosperous Europe. It keeps power in check, protects fundamental rights, and gives citizens and businesses the certainty they need to thrive. By safeguarding the rule of law, we strengthen democracies, build trust in our institutions, and help ensure a fairer, more resilient Europe for generations to come.
Michael McGrath, Commissioner for Democracy, Justice, the Rule of Law and Consumer Protection
This report is important because it shows our candidate countries where they can do more to ensure their institutions can uphold democracy, protect people’s rights and apply laws fairly and consistently. Progress in these areas is a core requirement for EU membership that affects the pace of accession negotiations. It also helps to attract investment and supports the gradual integration into the Single Market. By already including candidates in the same rule-of-law reports we give to Member States, we help strengthen democracy across our neighbourhood and make our Union safer.
Marta Kos, Commissioner for Enlargement
ABSTRACT – CYPRUS:
Justice system
In Cyprus, the ongoing reform of the Law Office, which plans to establish the Office of the Public Prosecutor Gener-
al and the introduction of an effective review of decisions not to prosecute or to discontinue proceedings, remains
pending before Parliament. A distinct branch of administrative justice was established. Measures to reinforce trust
in the judiciary have been taken, including new guidelines on recusal of judges. The Supreme Constitutional Judi-
cial Council held that probationary appointments of judges rely on a long-standing practice. The digital transfor-
mation of the justice system remains limited with key projects progressing slowly, while efforts to strengthen the
alternative dispute resolution framework continue. Challenges regarding judicial recruitments and infrastructure
persist. While the clearance of backlog cases is progressing, and new procedural rules aim to enhance efficiency,
the duration of judicial proceedings and the delays in making the Commercial Court operational continue to raise
serious concerns, including among the business community. The establishment of an independent Court Service,
that seeks to streamline court administration and alleviate the burden on the judiciary, faces persistent delays.
Anti-corruption framework
The Independent Authority against Corruption (IAAC) has been strengthened with the adoption of new legislation
on recruitments. Efforts continue to investigate high-level corruption with further new convictions, new police
structures are being created and there are calls for specific trainings for judges and prosecutors. The new legis-
lation on asset declarations for elected and appointed officials started to apply. As regards post-employment, a
new law has enhanced restrictions while initiatives are underway to expand the categories of persons subject to
oversight. The monitoring of the law on lobbying is being strengthened. Integrity rules were strengthened and a
comprehensive strategy for the integrity of persons entrusted with top executive functions is in preparation. Plans
to revise the law on political party financing aim to address previously identified shortcomings. Measures continue
to be deployed to tackle risks in public procurement.
Media freedom and pluralism
Measures are being taken to ensure the adequacy of the resources of Cyprus’s regulator for audiovisual me-
dia services. Reforms to improve the legal framework relating to transparency of media ownership are at an
advanced stage. Reforms are also underway to improve transparency in the field of state advertising and to
strengthen the rules and mechanisms to enhance the independent governance of public service media. The Office
of the Information Commissioner continues to raise awareness on the law regulating public access to information,
while further measures are needed to improve it. The overall situation as regards the safety of journalists remains
stable, however they continue to experience precarious working conditions.
Institutional checks and balances
Substantial steps have been taken to enhance public participation in decision-making. Businesses continue to see
challenges in the quality of law-making and the need to streamline legislation. The Audit Office gained financial
autonomy and safeguards were introduced to the appointment procedure for the Auditor General and the Deputy
Auditor General to enhance their independence. The Audit Office is seeking ways to improve access to information
necessary for the performance of its tasks. Reforms to improve the framework for Civil Society Organisations are
advancing. Parliament’s regular stakeholder discussions foster public debate on the rule of law.
RECOMMENDATIONS:
Overall, based on the recommendations in the 2025 Rule of Law Report, considering other developments
that took place in the period of reference and in addition to recalling the relevant commitments made under
the Recovery and Resilience Plan, and the country-specific recommendation under the European Semester on
the efficiency of the justice system, the Commission concludes the following:
?Some further progress has been made on the reform of the Law Office and on establishing an effective re-
view of decisions not to prosecute or discontinue proceedings. Since relevant draft legislation remains pending
before Parliament, it is recommended to Cyprus to finalise the ongoing reform of the Law Office and the
establishment of the Office of the Public Prosecutor General and to establish an effective review of de-
cisions not to prosecute or to discontinue proceedings, including for victimless offences, taking into account
European standards on independence and autonomy of the prosecution.
?The duration of court proceedings remains a serious concern and the establishment of an independent
Court Service to streamline court administration faces delays. It is recommended to Cyprus to take forward
plans to establish an independent Court Service with a view to improving the efficiency of justice.
?Significant progress has been made on the legislative reform to strengthen the Independent Authority against
Corruption (IAAC) and to ensure it has the human and technical resources to effectively perform its task, as new
legislation was adopted on recruitments. To ensure a fully effective IAAC, further measures remain necessary.
To address this, it is recommended to Cyprus to enhance the operational effectiveness of the IAAC.
As regards the other 2025 recommendations, the Commission concludes that:
?Some progress has been made to (i) ensure fair and transparent distribution of advertising expendi-
ture by the state and state-owned companies and (ii) to strengthen the rules and mechanisms to enhance
the independent governance of public service media, as draft legislation has been tabled. Given that the
topics of these two recommendations are covered by provisions of the European Media Freedom Act
(EMFA), while the Rule of Law Report will continue to monitor significant developments and report on their im-
pact, further follow-up will be ensured as part of the Commission’s support to Member States and enforcement
of the EMFA.
?Significant progress has been made in introducing safeguards in the appointment procedure for the
Auditor General and the Deputy Auditor General to enhance their independence, with establishing a fixed,
non-renewable eight-year term and stricter qualification criteria for their appointment. Monitoring of further
developments in this area will continue in the Rule of Law Report.
Commission boosts Europe’s competitiveness, decarbonisation and independence with Electrification Action Plan and ETS review
The Commission today presents an Electrification Action Plan to make Europe the first electro-powered continent, and a stronger carbon market to support EU’s industry in the clean transition and electrification.
Europe’s reliance on imported fossil fuels has repeatedly exposed it to geopolitical shocks. These have driven up energy prices for both households and companies, and dragged down our competitiveness. While 70% of EU electricity is now generated from homegrown clean energy sources, the electrification rate of energy demand has stalled at 23% over the past decade. We therefore need to accelerate the electrification of energy-using sectors, notably industry, transport and buildings.
To support this ambition, an indicative electrification target of 46% by 2040 will be assessed by the Commission as part of the post-2030 Energy Union package. Reaching this goal could cut the EU’s fossil fuel import bill by pound 260 billion per year by 2040. Electrification comes with substantial benefits for the EU economy, businesses and citizens in terms of lower energy prices and competitiveness, stronger energy security and resilience.
To help European manufacturers benefit and lead industrial decarbonisation and electrification efforts – to make the switch – we need investment at scale.
Since its launch in 2005, the EU Emissions Trading System (ETS) has delivered. It has generated more than pound 270 billion in revenues that were reinvested in innovation, industrial decarbonisation and the modernisation of Europe’s energy system. All the while helping Europe cut emissions by 50% in the sectors it covers. This market-based system ensures predictability across all EU countries.
However, the geopolitical and economic context has changed, and EU industry is under increased pressure. While we continue our work on climate action, we have to modernise our main decarbonisation policy – the EU ETS – to be our innovation and investment engine for our competitiveness and independence – in line with the European Council June 2026 conclusions and the Clean Industrial Deal.
Ursula von der Leyen, President of the European Commission said: „The best way to reduce Europe’s fossil energy dependency is to power our economy with electricity from clean, homegrown sources. Today we are proposing to make Europe the world’s first electro-powered continent. From lowering electricity prices to adapting our carbon market to the changing global realities, this is also an investment and independence plan. To keep the clean transition on track, bring relief to our industry, and support decarbonisation. Let’s switch it on.’
The ETS Review: an investment engine fit for 2040 goals
The review will bring relief to industry, while preserving the essential role of the ETS in the climate and energy transition, in line with the EU Climate Law. It updates the Linear Reduction Factor (LRF) of 3.7% for 2031-2035 and 1.7% for 2036-2040, making the trajectory more gradual and aligned with domestic climate ambition level. Up to 2% high-quality international credits will allow to finance decarbonisation projects abroad and provide breathing space in 2036-2040 when the emission reduction in Europe will become more challenging.
The revised ETS will have a strong focus on investments. The Industrial Decarbonisation Bank will have pound 100bn funding going towards industrial decarbonisation across Europe at scale. The ETS Investment Booster will be available before 2030 as the first phase of the Bank. The EU ETS Innovation Fund will continue to support first commercial applications of innovative clean technologies in a wide range of sectors. And Member States will be required to spend 50% of their national ETS revenues on investments to decarbonise ETS sectors. This adds up to more than pound 100bn in investments before 2030.
Solidarity remains at the core of the ETS. The Modernisation Fund will continue to support lower-income Member States to upgrade energy systems and industrial transformation.
Free allocation for companies will continue beyond 2030, and will be more closely linked to investments in decarbonisation in Europe. National ETS revenues should be reinvested in ETS sectors. The principle is clear: contributions by industry should flow back to industry. This approach encourages and rewards those that invest in the clean transition – and incentivises those who struggle to catch up.
The proposal also integrates permanent carbon removals into the EU ETS. This will give additional flexibility for the hardest-to-abate sectors and will at the same time support the scale-up of these technologies.
A separate proposal on benchmarks aims to increase free allocation to industry worth pound 6 billion for the period 2026-2030. For sectors that are covered by the Carbon Border Adjustment Mechanism (CBAM), the reduction of free allocation will be slowed and the phase-out extended until 2038.
The Commission also proposes a reform of the Market Stability Reserve (MSR) to further strengthen market stability and predictability for investments, maintain liquidity and reduce excessive price volatility. This complements the Commission’s proposal of April to stop the automatic invalidation of allowances held in the Reserve.
The proposal strengthens EU ETS for aviation and maritime sectors and extends it to waste incineration. Across these sectors, the review is creating new business opportunities, addresses risks of circumvention and levels the playing field. It also provides coherence with international developments.
The Electrification Action Plan
The benefits of electrification for European consumers are clear: driving a battery-electric vehicle can save up to 78% compared to an equivalent fossil-fuelled car. Switching from gas boilers to heat pumps cuts the average EU household’s heating bill by up to 60%, while providing important co-benefits for climate adaptation. However, barriers to widespread adoption remain.
Electricity often costs three times more than gas. Grid connections can take years. Too many innovative technologies never reach commercial scale. Companies have too little incentive to make the switch from fossil fuels to electricity. The Electrification Action Plan addresses all these barriers.
The Plan focuses on reducing the price gap between electricity and fossil energy costs and on incentivising the uptake of cleaner, electricity-based technologies such as heat pumps, electric vehicles and batteries, among others, across Europe. The Action Plan seeks to level the playing field between electricity and gas. Their price differential often discourages the shift to cleaner options such as heat pumps, electric vehicles and electric industrial processes.
To tackle this, the proposal to future-proof electricity bills in the EU will empower Member States to reduce network charges for certain consumer groups and taxes for energy-intensive businesses. It also spurs faster deployment of smart meters, which will make it easier for consumers to save on their energy bills. The proposal also seeks to make sure that electricity is not taxed more heavily than gas.
The Action Plan also proposes solutions to lowering the upfront costs of electrification technologies across key demand sectors, such as buildings, transport and industry. It sets out a wide variety of tools that can be mobilised, such as the use of social leasing schemes, ETS financial instruments, including the Social Climate Fund and the Industrial Decarbonisation Bank, and a Clean Heat Market mechanism.
To enable electrification, we need to speed up our grid deployment. European electricity grids are among the largest and most reliable in the world. However, long waiting lists for new connections and the existing grid is not being used as efficiently as it could be. The Grids Package proposed last year addresses these challenges, and its swift adoption by the co-legislators by the end of the year will be key for Europe to speed up electrification.
The Plan addresses other barriers, including the slow uptake of innovative electrification solutions, by promoting the development of viable investment project and manufacturing capacity in clean energy technologies. It adopts a whole-value chain approach to bring the business case of electrification, starting with investing in skills and the job creation potential. Electrification has the potential to create hundreds of thousands of quality jobs. And we have to make sure our workforce is ready.
For more information
ETS Directive proposal
Proposal on monitoring, reporting and verification (MRV)
Proposal on the revised values for the ETS heat and fuel benchmarks
Impact assessment on the ETS Directive (including ETS aviation and maritime)
Questions and answers on Emission Trading Scheme
Factsheet on Emission Trading Scheme
EU Emissions Trading System
Clean Industrial Deal
Communication – Electrification Action Plan (COM/2026/595)
Staff working document – synopsis report – electrification action plan (SWD/2026/596)
Staff working document – Guidance on regulatory sandboxes and living labs in the EU for vehicle-to-…
Staff working document accompanying the proposal for a Regulation fostering electrification and digitalisation
Questions and answers on EU Electrification Action Plan and Network charges
Factsheet on EU Electrification Action Plan and Network charges
Proposal for Regulation on Future Proofing Energy bills
Communication – Electrification Action Plan (COM/2026/595)
Staff working document – synopsis report – electrification action plan (SWD/2026/596)
Staff working document – Guidance on regulatory sandboxes and living labs in the EU for vehicle-to-grid pilots (SWD/2026/595)
Proposal for a Regulation amending Regulation (EU/2019/943) -fostering electrification and digitalisation (COM/2026/600)
Staff working document accompanying the proposal for a Regulation fostering electrification and digitalisation (SWD/2026/600)
Quote(s)
The best way to reduce Europe’s fossil energy dependency is to power our economy with electricity from clean, homegrown sources. Today we are proposing to make Europe the world’s first electro-powered continent. From lowering electricity prices to adapting our carbon market to the changing global realities, this is also an investment and independence plan. To keep the clean transition on track, bring relief to our industry, and support decarbonisation. Let’s switch it on.
Ursula von der Leyen, President of the European Commission
Europe’s competitiveness will be built on clean energy, not on imported fossil fuels. By strengthening the carbon market and accelerating electrification, we are giving businesses the confidence to invest, innovate and lead next generation technologies. We are building the foundation for the EU’s future economy while ensuring that we remain fair to people and businesses.
Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition
The EU ETS has proven that carbon pricing works. It has cut emissions, strengthened Europe’s energy security and mobilised investment across our economy. Today’s proposal on the ETS review brings together three key goals: climate action, competitiveness, and independence. It advances climate action, by also transforming the ETS into a genuine engine for innovation and investment.
Wopke Hoekstra, Commissioner for Climate, Net Zero and Clean Growth
With this plan, we are putting Europe on a course to become the world’s first electro-continent. The message we are sending today is very clear: choose electricity over fossil fuels. Choose green, home-grown, cheaper electrons over black, imported, expensive molecules. Choose independence over vulnerability. An accelerated clean energy transition coupled with electrification is the answer to Europe’s challenges in terms of security, competitiveness and decarbonisation.
Dan Jørgensen, Commissioner for Energy and Housing
Commission registers two European Citizens’ Initiatives on education and housing
Today, the European Commission registered two European Citizens’ Initiatives (ECIs) entitled: ‘All On Board – For your right to citizenship without borders’ and ‘Right to Housing! Now and Forever’.
The initiative ‘All On Board – For your right to citizenship without borders’ calls for ‘an all-of-society approach for a democratic Europe, resting on education and universal suffrage’. Its organisers consider that EU citizens should have the right to: ‘Learn about European rights, values and participation in the EU’, ‘Experience participation in a European exchange program’ and ‘Have their results recognised and validated back home and across the EU through academic, technical, vocational and transversal qualifications treated equally’.
The initiative ‘Right to Housing! Now and Forever’ calls for ‘access to housing that is affordable, sustainable and fair’. Its organisers propose the introduction of measures to regulate ‘short-term rentals and vacancy’. They call for the conversion of ’empty buildings, like vacant homes and offices, into housing’, the setting of ‘enforceable standards to keep housing affordable and sustainable’ and the establishment of an ‘EU Housing Agency’.
As these initiatives fulfil the formal conditions established in the relevant legislation, the Commission considers them legally admissible under the European Citizens’ Initiative Regulation. At this stage, the Commission only checked whether the initiative meets the legal conditions for registration. The registration does not influence the Commission’s final decision on their merits, or any potential action it may take. The Commission will take a decision on an initiative only if it collects at least one million signatures from EU citizens.
Next steps
Following the registration of the two initiatives, the organisers have six months to open the 12-month period of signature collection. If an ECI receives at least one million statements of support during that time, with minimum numbers reached in at least seven Member States, the Commission is required to react and decide what action, if any, it will take in response to the initiative, justifying its decision.
Background
The ECI was introduced with the Lisbon Treaty as an agenda-setting tool for citizens. It was officially launched in April 2012. Once formally registered, a European Citizens’ Initiative allows one million citizens from at least seven EU Member States to invite the European Commission to propose legal acts in areas where it has the power to act. The conditions for admissibility are: (1) the proposed action does not manifestly fall outside the framework of the Commission’s powers to submit a legal proposal, (2) it is not manifestly abusive, frivolous or vexatious and (3) it is not manifestly contrary to the values of the Union as set out in Article 2 of the Treaty on European Union and rights enshrined in the Charter of Fundamental Rights of the European Union.
Since the launch of the European Citizens’ Initiative, the Commission has registered 134 initiatives.
The content of initiatives only expresses the views of their organisers and can in no way be taken to reflect the views of the Commission.
For more information
‘All On Board – For your right to citizenship without borders’
‘Right to Housing! Now and Forever’
ECI statistics
ECIs currently collecting signatures
European Citizens’ Initiative Forum
#EUTakeTheInitiative campaign
New rules to stop the destruction of unsold clothes and shoes enter into application, fostering the EU circular economy
On Sunday, 19 July, new rules banning the destruction of unsold apparel, clothing accessories and footwear under the Ecodesign for Sustainable Products Regulation (ESPR) will enter into application for large companies. Medium-sized companies are expected to follow in July 2030. By promoting reuse and recycling, these rules will support a more rational use of resources, reduce environmental damage and create a level playing field for companies. As a result, the textile sector can move faster towards more circular practices.
Every year in Europe, an estimated 4-9% of unsold textiles are destroyed before ever being worn. This waste generates around 5.6 million tonnes of CO2 emissions. The ESPR, which entered into force in July 2024, aims to significantly improve the sustainability of products placed on the EU market by improving their circularity, energy performance, recyclability and durability. The ban of destruction of unsold textiles is one of the first concrete measures under the ESPR. The law also requires companies to disclose information on the unsold consumer products they discard as waste, in the simplest possible way without adding extra administrative burden. This responds to consumers’ growing concerns about textile waste due to the environmental and social impacts of fast fashion.
Under the new rules, companies will have to prioritise keeping products in use by selling them, donating them to charities or social enterprises, or preparing them for reuse. Destruction will only be allowed under specified circumstances and must be carried out in line with the waste treatment hierarchy. In February 2026, the Commission already adopted measures to clarify under which circumstances this destruction will be permitted – for instance, due to safety reasons or product damage.
You can find more information on the entry into application of rules on destruction of unsold goods online.
(For more information: Anna-Kaisa Itkonen – Tel.: +32 2 295 75 01; Maëlys Dreux – Tel.: +32 2 295 46 73)
Commission publishes State aid guidance on carbon contracts for difference
The European Commission has published guidance to support Member States in designing State aid schemes based on carbon contracts for difference (CCfDs), in compliance with the Guidelines on State aid for climate, environmental protection and energy (CEEAG). The aim is to support Member States in setting up such aid schemes, in line with EU rules.
A CCfD is a subsidy agreement between a granting authority and a beneficiary (for instance, a steel or chemicals plant) to help reduce greenhouse gas emissions by removing financial risks for decarbonisation projects. Typically, a CCfD ensures a certain remuneration (strike price) for every tonne of CO2 the beneficiary avoids emitting. If the market carbon price is lower than the strike price, the granting authority pays the difference to the beneficiary. Conversely, if the market price is higher than the strike price, the beneficiary may either have to pay back the difference or keep the extra revenue. CCfDs can present various forms and approaches and the guidance provides such examples, but is not meant to restrict design choices by the Member States.
CCfDs play an important role in achieving the objectives of the Clean Industrial Deal by accelerating decarbonisation in Europe’s industrial sectors while boosting their competitiveness. By providing long-term price certainty for CO2 reductions, CCfDs help derisk high-cost decarbonisation investments such as hydrogen, electrification, and carbon capture, and make them financially viable. CCfDs can ultimately strengthen Europe’s strategic autonomy and industrial resilience in line with the Clean Industrial Deal’s goals.
(For more information: Siobhan McGarry – Tel.: +32 2 296 47 98; Luuk de Klein – Tel.: +32 2 299 47 74)
Commission appoints a new Principal Adviser in its Directorate-General for Energy
The European Commission appointed today Tomas Anker Christensen as Principal Adviser EU Special Coordinator for the Global Clean Transition within its Directorate-General for Energy (DG ENER). This department develops and supports the implementation of the Commission’s policies on energy, focusing on delivering secure, sustainable, and affordable energy for Europe. The date of effect of this decision will be determined later.
With over 30 years of professional experience, Mr Christensen has built extensive expertise in climate diplomacy, energy transition and global governance, underpinned by a strong track record in shaping and implementing major European and international policy initiatives. Throughout his career, Mr Christensen has led work on key EU priorities, including international climate negotiations, energy security, clean energy transition, climate finance and sustainable infrastructure. He also has extensive experience in leading teams and managing complex policy portfolios. Mr Christensen combines strong strategic, analytical and negotiation skills with extensive experience in stakeholder engagement and partnership-building, working closely with governments, international organisations, financial institutions and the private sector. He has demonstrated a proven ability to translate complex political and technical challenges into coherent policy approaches while fostering cooperation across sectors and advancing the Union’s external energy and climate objectives. His broad policy and coordination experience provides a solid foundation for serving as Principal Adviser EU Special Coordinator for the Global Clean Transition in the Directorate-General for Energy (DG ENER).
Tomas Anker Christensen, a Danish national, was Member of Cabinet for Commissioner for Energy and Housing Dan Jørgensen. Before joining the European Commission in 2024, he held senior positions in international organisations and the Danish Ministry of Foreign Affairs.
(For more information: Balazs Ujvari – Tel.: +32 2 295 45 78; Isabel Otero Barderas – Tel.: +32 2 296 69 25)
Commission appoints a new Principal Adviser in its Directorate-General for Enlargement and Eastern Neighbourhood
The European Commission appointed today Marko Makovec as Principal Adviser for Reconciliation and Normalisation Western Balkans within its Directorate-General for Enlargement and Eastern Neighbourhood (DG ENEST). This department takes forward the EU’s Enlargement and Eastern Neighbourhood policies, assisting those countries with a perspective to join the EU in meeting the criteria defined by the Treaty of European Union and the European Council. The date of effect of this decision will be determined later.
With over 30 years of professional experience, Mr Makovec has acquired deep expertise in enlargement, external relations and regional affairs, supported by an extensive record in advancing the European Union’s engagement with the Western Balkans and neighbouring countries. Throughout his career, Mr Makovec has led work on key EU priorities, including enlargement negotiations, political dialogue, regional stability and relations with partner countries. His career includes extensive experience in managing people, resources and high-profile policy dossiers. Mr Makovec has demonstrated a strong ability to navigate politically sensitive issues, build consensus and reconcile differing interests in a complex international environment. His experience spans enlargement policy, diplomatic engagement, high-level negotiations and regional cooperation. His combination of institutional knowledge, diplomatic experience and negotiation skills provides a solid foundation for serving as Principal Adviser for Reconciliation and Normalisation Western Balkans in the Directorate-General for Enlargement and Eastern Neighbourhood (DG ENEST).
Marko Makovec, a Slovene national, most recently served as Head of Cabinet to the Commissioner for Enlargement, Marta Kos. Previously, he was Director at the European External Action Service (EEAS), where he was responsible for the Western Balkans, Trkiye, the European Economic Area (EEA) countries and post-Brexit relations with the United Kingdom. Priorly, Mr Makovec held a range of senior positions in the Slovenian diplomatic service and the Slovenian Government.