The EC proposes updating the parameters of the EU ETS: industry will receive more free allowances

The European Commission (EC) has proposed updated emission caps for the EU Emissions Trading System (EU ETS) for the period 2026–2030. The proposal calls for the allocation of a greater number of free emission allowances to industry over the next few years, which could potentially save companies €4 billion in CO2 emission costs. This is stated in a European Commission press release.

According to the document, industrial companies will receive a greater number of free emission allowances over the coming years. The main provisions of the proposal include:

• Coverage level: on average, free allowances will cover approximately 75% of the industrial sector’s emissions.
• Cost savings: according to EC estimates, this approach will allow companies to save approximately €4 billion ($4.7 billion) in costs related to CO2 emissions.
• Promoting electrification: the updated methodology maintains coverage of indirect emissions from electricity consumption for 14 product benchmarks. This will lead to higher benchmark values with a total financial impact of around €4 billion between 2026 and 2030.
• Direct investments: in March 2026, European Commission President Ursula von der Leyen announced the allocation of €30 billion to support investment projects within the ETS. These funds, generated from the sale of 400 million allowances, will be directed toward the decarbonization of small and medium-sized businesses, as well as the modernization of industrial heat supply.

Currently, in the EU ETS, the free allocation of allowances is based on the performance of the top 10% of the most efficient (environmentally friendly) producers in each sector. Companies that exceed these standards are forced to purchase additional allowances on the market, which incentivizes the transition to low-carbon technologies.

In addition to revising the benchmarks, the European Commission plans to amend the Market Stability Reserve (MSR) to adapt it to potential future supply shortages.

The document is already open for public discussion and consultation with EU member states. The timeline for implementing the changes is as follows:

1. June 2026: an implementing act on reference values is expected to be adopted following the conclusion of consultations.
2. July 2026: the Commission will conduct a comprehensive review of the entire EU ETS system to modernize it.
3. Introduction of new benchmarks: as part of the review, the plan is to introduce sector-specific reserve benchmarks and a new methodology for calculating them to provide operational support to vulnerable sectors.

“The timing of the benchmark updates has become critically important for European industry, as companies face mounting pressure due to high energy prices, global competition, and the gradual phase-out of free allowances for sectors subject to the CBAM. European business representatives note that the combination of high carbon costs and pressure from international markets threatens the competitiveness of EU industry,” writes S&P Global.

As reported by GMK Center, Germany will allocate €5 billion ($5.8 billion) in financial aid to energy-intensive industries to implement low-carbon technologies. For the first time, the funding program will include support for carbon capture and storage (CCS) technologies.