The European Commission published its Emissions Trading System overhaul on July 17, the proposal this briefing flagged as the one to watch last week. It slows the pace of emissions cuts after 2030, extends free carbon permits to 2038, and opens a €50 billion compliance market for carbon removal.
The same day, the Commission set a target to double electricity's share of EU energy consumption to 46% by 2040. The lobbying that shaped the leaked draft got most of what it wanted; whether the physical grid can carry the electrification bet is where this week's stories on auctions and interconnectors come in.
Energy Transition
Germany opens its first capacity auction, and storage says the rules favour gas
The Bundesnetzagentur launched the first 4.5 GW auction under Germany's new capacity law on July 21, inviting bids for dispatchable generation and long-duration storage through September 8. Winners get paid to stay available for 15 years, at up to €244,000/MW.
Battery groups say the rules favour gas anyway: batteries need 10-hour continuous discharge and 92% round-trip efficiency to qualify, a bar that values a 20-hour battery the same as a gas turbine. Bidders must commit before the Commission has even cleared the scheme under state aid rules. (energynews.pro)
Portugal and Morocco revive a power link Lisbon has wanted for years
Portugal's energy minister Maria da Graça Carvalho and Morocco's Leila Benali agreed on July 21 to jointly ask Brussels to classify a new interconnector as a Project of Common European Interest, unlocking EU co-financing. A 2018 estimate put the cost at €800 million; Carvalho says that figure is stale.
Portugal trades electricity across only one border, with Spain. "We are an island," Carvalho said. The push follows the April 2025 Iberian blackout; both governments now want private investors alongside EU money before construction starts. (The Portugal News)
Germany's degraded peatlands could hold up to 268 GW of solar
Fraunhofer ISE published guidance on July 21 estimating 134 to 268 GW of technical solar potential across roughly 334,500 hectares of drained, degraded peatland in Germany. Those drained peatlands cover just 5% of German territory but account for nearly 7% of its greenhouse gas emissions.
The guidance draws a hard line: only already-degraded land qualifies, not peat still worth protecting. It is a rare case of land competition working in solar's favour rather than against it. (pv magazine)
Climate Tech
Acciona tests ultracapacitors to make wind and solar act like a power plant
Acciona Energía has scaled up a hybrid storage pilot pairing ultracapacitors with lithium-ion batteries at its Barásoain wind farm and Tudela solar plant in Navarra, Spain, moving from a 250 kW first phase to 1.25 MW. The goal: renewable plants that deliver fast frequency response and voltage support, services grids have always sourced from conventional thermal plants.
Ultracapacitors absorb rapid power swings almost instantly, sparing the batteries that wear and freeing them to handle longer discharges. As synchronous gas and coal plants retire, someone has to replace the stability they provided by default. (pv magazine)
Brussels opens a compliance market for carbon removal, and reactions split
The ETS overhaul published July 17 folds permanent carbon removal into the trading scheme through a centrally managed purchasing programme, creating a compliance market worth an estimated €50 billion between 2031 and 2040. Only bioenergy carbon capture and direct air capture verified under the EU's Carbon Removal Certification Framework qualify at first.
The Clean Air Task Force called it a major milestone, giving removal companies the strongest demand signal they have had. Other analysts want the door opened beyond BECCS and DACCS, arguing the EU is picking winners in a field still working out what scales. (Carbon Herald)
Policy & Regulation
Ireland gets Commission approval for a €300 million industrial energy relief scheme
The European Commission approved a €300 million Irish state aid scheme on July 17, the same day as the ETS proposal, to give temporary electricity price relief to energy-intensive companies. It is a small line next to the ETS headline, but it previews the trade-off running through the whole package: Brussels wants industry electrified and decarbonised, and is willing to spend national and EU money to stop that transition pricing industry out of Europe first. (European Commission)
The Commission wants heat pumps mandatory in public buildings, and the installers don't exist yet
Alongside the electrification target, the Commission's plan would make heat pumps mandatory in all public buildings and push member states to subsidise households switching off gas boilers, lifting annual installations from 2.4 million to 4 million by 2030.
That needs roughly 750,000 more installers, and half the existing workforce needs retraining. A mandate is a policy decision; a trained workforce is a multi-year build-out. (EU Today)
Science
A hydrology study complicates the EU's new appetite for forest-based carbon removal
A study published in Nature Climate Change on July 15 finds that forest loss and gain do not mirror each other hydrologically: deforestation cuts evapotranspiration and rainfall, but restoration does not win it back at the same rate. Recovering the water flux lost in South America needs 43–63% of the degraded area restored; in Africa the figure is 53–83%, and in Southeast Asia climate limits cap how much replanting can recover at all.
The finding lands days after Brussels opened a compliance market that will pay for nature-based carbon removal. A policy built on the assumption that planting trees simply reverses the damage of cutting them down is working from a model this study says is too simple. (Nature Climate Change)
One to Watch
The UK-EU summit meets today to decide on linking their carbon markets
Britain and the EU hold their second post-reset summit in Brussels today, July 22, with linking the UK and EU emissions trading schemes among the items on the table. The two sides have been negotiating the link since May 2025, aiming to spare traders new carbon border costs once both CBAMs are fully in force.
The EU's ETS proposal complicates the timing: the UK now has to decide whether to link to a scheme that just agreed to move slower than expected. Watch whether the summit produces a linkage agreement, a delay, or UK pushback on the terms Brussels just redrew.