This will enable businesses to save around €8.25 billion on carbon costs

European Union member states have agreed to grant additional free carbon emission allowances to heavy industry firms. This move is intended to support the economic competitiveness of these companies. 

According to the Council of the EU, under the European Commission’s proposal, an additional 121 million free CO₂ allowances will be allocated to industrial sectors between 2026 and 2030. The allocation will be calculated on the basis of fuel consumption and heat production figures. This will enable businesses to save around €8.25 billion ($9.52 billion) on carbon costs.

Among the main beneficiaries of the incentives are companies in the chemical and metalworking industries, as well as ceramics and glass manufacturers.

Under the EU Emissions Trading Scheme (ETS), heavy industry firms are required to purchase carbon emission allowances, which is intended to encourage a reduction in their environmental impact. At the same time, there is a mechanism for the free allocation of allowances, designed to protect European businesses from competition from foreign companies that do not incur such costs.

Although the overall concept of the ETS provides for a gradual reduction in free allowances in order to meet climate targets, the EU will temporarily increase their volume.

EU countries are currently preparing for accelerated negotiations with the European Parliament on the final rules (known as ‘fall-back benchmarks’) with a view to reaching an agreement before the end of this year. At the same time, discussions are ongoing regarding a broader reform of the Emissions Trading System, with a decision expected in 2027.

A draft bill was before the European Parliament that would oblige the governments of EU countries to spend 75% of the revenue from the sale of ETS allowances on the green transition of businesses covered by the scheme.  This percentage  exceeds the 50% figure originally proposed by the European Commission.

The document also provides for a gradual reduction in emission allowances under the ETS: by 3.4% annually from 2031 and by 2.3% from 2036. By way of comparison, the European Commission had proposed a schedule of 3.7% and 1.7% respectively. Lise’s proposal will allow businesses to reduce emissions at a slower pace initially, before accelerating the pace in the second half of the 2030s. This is in response to concerns raised by the chemical and other industries regarding the risks to the survival of European plants and competitiveness in global markets.