On 27 February 2018, the Council of the EU formally approved the reform of the EU emissions trading system (ETS) for the period after 2020. The revised ETS Directive is a significant step towards the EU reaching its climate targets. The formal approval by the Council of the EU is the final step in the legislative process. 

The new directive will enter into force on the 20th day following its publication in the official journal. ETS, a scheme for greenhouse gas emission allowances trading launched in 2005 (Directive 2003/87/EC), aims to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner. It sets a cap on how much CO2 heavy industry and power stations can emit. The total volume of allowed emissions is distributed to companies as permits which can be traded. Covering around 45% of the EU's greenhouse gas emissions, ETS is one of the pillars of the EU’s strategy to reach its climate targets for 2030 as well as its commitments under the Paris Agreement.

The EU climate targets for the period after 2030 were set in 2014, when the European Council made a commitment to reduce the overall greenhouse gas emissions of the Union by at least 40% below 1990 levels by 2030. To achieve the EU 2030 climate targets, sectors covered by the EU ETS will need to reduce their emissions by 43% compared to 2005. However, in recent years, the economic crisis and other factors led to a decrease in the carbon price and the accumulation of a large surplus of allowances in the system. 

Approved reform of the ETS brings following amendments: 

• the cap on the total volume of emissions will be reduced annually by 2.2%, 
• the number of allowances to be placed in the market stability reserve will be doubled temporarily until the end of 2023, 
• a new mechanism to limit the validity of allowances in the market stability reserve above a certain level will become operational in 2023. 

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 Neno Dimov, Bulgarian Minister of Environment and Water, stated: 

“As Presidency, we will work towards retaining the EU's leading role in the negotiations on the conclusion of the implementation rules of the Paris Agreement. Reducing greenhouse gas emissions will not only contribute to the fight against climate change but it will also positively impact the improvement of the air quality. Protecting the environment and the health of European citizens is one of the priorities of the Bulgarian Presidency."