The European Union’s Council and Parliament have provisionally agreed to provide more free carbon allowances from 2026 through 2030 to energy-intensive industries covered by ETS benchmarks based on heat and fuel use, creating a cushion of roughly 121 million allowances to lower costs and reduce the risk of production moving abroad.
The agreement applies to industries whose allowances are calculated from heat or fuel use rather than from a measure tied to a specific product. Under the EU emissions trading system, each allowance covers one tonne of carbon dioxide emissions. The deal builds on a European Commission proposal to make about 88 million allowances available.
It adds 28 million allowances that had not been allocated because some installations failed to meet existing conditions. These conditions include requirements related to energy-efficiency audits or climate-neutrality plans. A further five million allowances are reserved to support sectors at particular risk of shifting production abroad because of carbon costs.
Any of that targeted reserve left unused would go toward industrial investment through the EU’s Modernisation and Innovation funds. The institutions say the measure is intended to help vulnerable industries stay competitive and keep production in Europe. They also say it will help the transition to lower emissions continue.
The agreement is provisional, and the Council and Parliament must still endorse and formally adopt it. After that, the Commission is expected to issue rules for calculating the benchmarks.