Brussels – The ETS remains at the heart of the European agenda. Around 121 million additional free CO2 emission allowances for European industries between 2026 and 2030, to protect them from the risk of production relocating to countries with less stringent climate regulations. This is the outcome of the provisional agreement reached yesterday evening (Thursday, 12 November) by the European Parliament and the Council of the EU on the revision of the heat- and fuel-based benchmarks for the Emissions Trading Scheme (ETS). The Parliament and the Council must formally approve the provisional agreement before it can be definitively adopted and before the European Commission can update the benchmarks.
The agreement broadens the European Commission’s initial proposal, which provided for the allocation of approximately 88 million free allowances to the relevant industrial installations. The co-legislators have agreed to add a further 28 million allowances, previously unallocated to installations that had not complied with the conditions set out under the ETS, bringing the total to approximately 116 million. In addition to these, 5 million allowances are set aside for targeted measures to support energy-intensive industrial sectors most exposed to the risk of carbon leakage.
“Through this agreement we will swiftly increase free allowances for vital energy-intensive sectors within the heat and fuel ‘fallback’ ETS benchmarks,” said Darragh O’Brien, Ireland’s Minister for Climate, Energy and the Environment. The amendment, he added, “will provide the predictability industry needs for the sustainable transition, while remaining competitive at home and retaining production within the EU.”
The European Parliament also expressed its satisfaction. “This is a good agreement. It ensures that European industry can stay competitive while remaining consistent with the EU’s climate objectives,” said the rapporteur, Adam Jarubas (EPP) of the Polish People’s Party. The agreement, he explained, addresses the “sharp cuts in free allocations” that many companies have had to face following the update of the benchmarks, and paves the way for the introduction of sector-specific parameters for sectors such as ceramics, where the general fuel benchmark does not adequately reflect the performance of the plants.
Heat- and fuel-based parameters, also known as fallback benchmarks, are used to calculate free allowances for industrial production when no specific product-related parameter exists. They account for around a quarter of the total free allocations and cover sectors such as chemicals, paper, food, ceramics and glass.
The agreement forms part of the wider debate on the competitiveness of European industry and the balance between support for businesses and the pursuit of decarbonisation targets. As also emerged during the parliamentary debate, the revision aims to address the disadvantages suffered by certain sectors following the update of the benchmarks for the period 2026–2030, while maintaining incentives for reducing emissions.
Any allowance not used within the 5 million reserve will be allocated to support investment through the Modernisation Fund and the Innovation Fund.
English version by the Translation Service of Withub
