EU Parliament seeks more free CO2 ETS allowances for industry

Brussels – Almost 100 million additional free emission allowances for European industries and increased funding to modernise district heating systems. The European Parliament’s Environment Committee (ENVI) aims to strengthen the protection of businesses against the risk of carbon leakage, i.e. the relocation of production activities to countries with less stringent climate regulations, by revising the benchmarks of the EU Emissions Trading Scheme (ETS). 

With 64 votes in favour, 11 against and 2 abstentions, MEPs adopted their position yesterday (19 October) on the European Commission’s proposal to revise the heat and fuels benchmarks for 2026–2030. These are the parameters used to calculate the CO₂ allowances allocated free of charge to industrial installations where no specific product benchmark exists.

 The committee supports the EU Commission’s proposal that all allowances still available for free allocation – estimated at around 88 million – should be used, and calls for a further 11 million to be added, withheld from installations that have failed to comply with the conditions set out in the ETS, bringing the total to close to 100 million. The revision would thus limit the reduction in reference values compared with the 2021–2025 period, with an average cut of around 12.5 per cent.

The People’s Party, the Social Democrats, the Liberals and the Conservatives backed the negotiating mandate.MEPs are also proposing to allocate one-third of the unallocated allowances to the Modernisation Fund and another one-third to the Innovation Fund. The rest would help adjust the benchmarks. Among other measures, the first instrument funds the modernisation of district heating networks; the second supports the development of innovative low-emission technologies.

The ENVI Committee also calls on the European Commission to introduce specific parameters for certain industrial sectors, starting with certain areas of the ceramics industry, where the general fuel benchmark does not adequately reflect the performance of the installations. “The Committee recognises, with broad support, that certain sectors need stronger protection against carbon leakage,” said the rapporteur for the report, Adam Jarubas (EPP).

 Parliament will vote on its position in the plenary on Thursday (22 October), before negotiations with the Council begin. The aim is to apply the new reference values as part of the 2027 update.

The PD MEP, Annalisa Corrado, also the PD’s environment spokesperson, expressed satisfaction, saying: “The vote in the ENVI Committee is a very important political result,” which demonstrates “that fair negotiation within the majority bloc can lead to concrete solutions, which are also accepted by other groups based on pragmatism and cooperation.” Furthermore, “the compromise on benchmarks, approved by 64 votes in favour and 11 against, corrects a distortion that has heavily penalised certain industrial sectors, particularly the ceramics sector, while maintaining Europe’s climate ambition and incentives for decarbonisation”, she added. It will now be “crucial” that Thursday’s vote in the Environment Committee “confirms this balance, with as wide a majority as possible.”

Fratelli d’Italia also gave a positive assessment. “We voted in favour in the ENVI Committee of the revision of the ETS parameters for 2026–2030, because this represents a first step forward compared with the European Commission’s proposal, which we found entirely unsatisfactory,” said the Fratelli d’Italia-ECR MEPs sitting on the ENVI Committee, Antonella Sberna, Vice-President of the European Parliament, and Stefano Cavedagna. “In particular, by incorporating our amendments into the text, we wanted to send a concrete signal of support to the ceramics industry, by making more free allowances available and introducing specific parameters – not previously provided for – at a time when businesses are facing unfair international competition,” they noted. “We hope that the plenary, by approving this text, will move beyond a Green Deal that has little to do with the needs of European industry,” they concluded.