The EU Commission proposes new parameters for the ETS: 4 billion for industry

Brussels – The European Union’s Emissions Trading Scheme (ETS) remains a perennial topic on the European Commission’s agenda. Today (11 May), the Commission presented the proposal to update the ETS reference values for the period 2026–2030, which is now open for public consultation and with Member States prior to adoption.

The benchmarks represent the emission intensity of the most efficient industrial producers in the EU and are used to determine the number of free allowances granted. Under the proposal, industries will continue to receive, on average, a free allocation equivalent to around 75 per cent of CO2 emissions. As the European Commission points out, “updating the benchmarks is an essential step in determining the level of free allocation of allowances to European industry,” and the EU executive “is responding to industry concerns by making full use of the available legal flexibilities.” To incentivise industrial electrification, the new approach maintains coverage of indirect emissions from electricity use across 14 product benchmarks. A decision which, according to Brussels, will lead to “higher reference values,” with an estimated financial impact of around €4 billion over the period 2026–2030, in the form of increased free allowances allocated to European industry.

“Today we are delivering on the commitment made by President Ursula von der Leyen to strengthen the European carbon market,” commented European Commissioner for Climate Action, Wopke Hoekstra. “Strengthening the market stability reserve, as proposed on 1 April, will improve resilience to volatility, while updating the benchmarks will further incentivise investment in the transition to a clean economy. This ensures that the EU ETS continues to promote decarbonisation, competitiveness, and clean investment,” he added.

Under the EU’s present ETS system, the free allocation of allowances is determined on a sector-by-sector basis based on the performance of the top 10 per cent of the most efficient producers. All companies receive a free allocation of emissions allowances, but those that exceed the benchmark set by the most efficient producers must purchase additional allowances to cover their excess emissions. “The ETS benchmarks thus reward the most efficient installations and provide a strong incentive for industries leading the transition,” the Commission points out.

The ETS Directive requires updating the reference values for the period 2026–2030 and incorporates this into the wider review of the European carbon market. The proposal complements the revision of the
Market Stability Reserve

presented on 1 April, which aims to “better adapt the reserve to future market developments,” including the possible scarcity of allowances in the coming decades.

According to the European Commission, these measures will help to “support the competitiveness and decarbonisation of EU industry,” while strengthening “the stability and predictability of the European carbon market.” The dossier is also part of the broader review of the ETS system scheduled for July 2026, aimed at ensuring that the mechanism remains “fit for the future” and continues to support the industrial transition towards climate neutrality.