As EU leaders gather for two days of discussions on key European priorities, including the EU’s next Multiannual Financial Framework (MFF), Ukraine, and the future of the EU Emissions Trading System (ETS), the Prime Ministers of Finland, Sweden and Denmark have delivered a clear joint message: Europe needs a strong, predictable and market-based carbon pricing system.

The Finnish Forest Industries Federation (FFIF) welcomes this Nordic commitment to safeguarding the ETS and the long-term investment signals it provides for European industry.

However, one crucial issue must not be overlooked in the ongoing negotiations: the 95% biomass rule.

Under the current ETS Directive, installations where more than 95% of fuel use comes from biomass can be excluded from the system, potentially losing access to free allocation.

This creates a fundamental contradiction. Industrial installations that have invested in energy efficiency improvements, electrification and replacing fossil fuels with renewable biomass risk being placed at a competitive disadvantage compared with installations that continue to rely more heavily on fossil fuels.

The ETS should not penalise the very industrial frontrunners that have already delivered substantial emissions reductions.

For Europe’s forest industry, this is a concrete issue affecting competitiveness, investment predictability and incentives for further decarbonisation.

As political discussions on the ETS intensify, FFIF calls for the 95% biomass rule to be corrected so that the system continues to reward emissions reductions and supports industrial transformation.

Protecting the ETS’s credibility and correcting its shortcomings must go hand in hand. Europe needs a carbon market that rewards decarbonisation, not one that penalises success.