Industry in the European Union may receive additional free greenhouse gas emission allowances under the EU Emissions Trading Scheme (EU ETS). The authorities are reportedly planning to take this step to safeguard the competitiveness of European industry. This appears to be a concession made under pressure from a number of EU countries, notably Poland, the Czech Republic and Italy, which are calling for the EU ETS to be relaxed.
This is reported by Reuters, citing draft conclusions from the EU summit.
The EU ETS acts as a tool for reducing greenhouse gas emissions, as heavy industry must pay for CO₂ emission allowances. However, there is also a certain pool of free allowances, the number of which the European Commission plans to increase.
This intention is concealed behind the rather abstract wording of a “separate position on addressing the concerns expressed by certain industrial sectors regarding the ETS benchmarks”.
EU diplomats told Reuters that this refers to a preliminary agreement under which the European Commission has agreed to propose rapid changes to the rules governing the allocation of free emission allowances. These will now be referred to as ‘reserve benchmarks’.
In one of the EU documents, journalists noted confirmation that the Commission had agreed to put forward “a separate proposal aimed at increasing the free allocation determined on the basis of reserve benchmarks”.
This agreement is set to come into force “with retroactive effect” – from 1 January 2026. It can therefore be expected that the chemical, oil refining and other industrial sectors covered by the ETS will receive bonus free allowances as early as this year.
It is worth recalling that a heated debate is ongoing in the EU regarding the revision of the EU ETS. The European Commission is due to present its proposals on this in mid-July. Member states are divided into two camps. Some support the emissions trading system, emphasising its effectiveness in decarbonisation. Others criticise it for placing excessive financial pressure on businesses, making them less competitive compared to importers from countries with less stringent climate policies.
The authorities are forced to strike a balance between these conflicting demands, but have repeatedly stated that dismantling the ETS is out of the question under any circumstances. On the contrary, European Commissioners told Euractiv that free allowances were a mistake, and that the leak of documents indicated there were no plans to increase their number.
