The EC will propose updated benchmarks for the free allocation of allowances in the ETS

The European Commission plans to propose updated benchmarks for free allowances in the ETS after Easter, which will determine their allocation to industrial sectors from 2026 to 2030.

Meanwhile, experts are reviewing the draft proposal (the figures are unpublished and currently unofficial). This was reported by Dan Maleski, Head of CBAM Hedging and Risk Advisory at Redshaw Advisors.

The expert notes that once approved, the updated values are also expected to be directly incorporated into the revised CBAM benchmarks, which are likely to be published shortly after the official release.

Maleski notes that the new benchmarks generally align with earlier forecasts based on previous leaks, though there are notable adjustments. For instance, in several cases, subsectors may receive more favorable treatment than previously anticipated, such as refined petroleum products and E-PVC.

Additionally, according to the draft, the benchmarks for coke will be 0.0231, for pig iron – 1.248, and for coke oven gas – 0.143, which are in line with analysts’ expectations.

It should be noted that on April 1, the European Commission announced the first concrete measure regarding changes to the EU ETS. This involves adjusting the Market Stability Reserve (MSR). The MSR reduces the supply of allowances to the market when there are too many in circulation and releases them when there is a shortage.

Under the current system, all allowances in the reserve exceeding 400 million are canceled. The European Commission has proposed an amendment that would suspend the cancellation mechanism, allowing these allowances to be retained as a buffer that can support market stability. The proposed change will better prepare the EU ETS to respond to future market events, including potential supply shortages in the coming decades.

These measures aim to ease pressure on energy-intensive industries. A broader review of the ETS remains on the agenda for July and aims to address carbon leakage, revenue use, and alignment with the bloc’s 2040 climate targets.

Maleski notes that implementing these changes is becoming increasingly critical. These changes directly affect participants in the European emissions trading system and CBAM, impacting company valuations, raw material pricing, and the viability of decarbonization strategies.

As a reminder, the European Commission will publish the first quarterly price for CBAM certificates on April 7. Importers of goods subject to the mechanism will be required to purchase the relevant certificates starting in February 2027 to cover their imports from the previous year (2026). Unlike in 2027, when the EC will calculate a weekly price, in 2026 the price of CBAM certificates will be calculated as the average quarterly cost of allowances set at EU ETS auctions.