EU Nations Back 121 Million Extra Free ETS Permits for Heavy Industry
The endorsement adds to Commission proposals worth EUR 6bn more in free allowances, weighing on EUA compliance demand as the 2026-2030 period draws closer.
A group of EU member states has endorsed an additional 121 million free allowances for industry under the bloc's Emissions Trading System, Montel reported, the latest move in a months-long effort by governments and industrial lobbies to reduce the carbon compliance purchase burden. The backing comes as the European Commission has been expanding free allocation through several parallel channels simultaneously.6,8
On Friday (2026-07-17), the Commission proposed revised product benchmarks for 2026 to 2030 that it said would give industry an extra EUR 6bn in free allowances, according to Montel. A week earlier, on Wednesday (2026-07-08), an EU official told Montel the Commission intended to distribute up to 400 million allowances directly from a planned "investment booster" fund between 2027 and 2029. Companies could draw on those allowances as needed.8,6
More free permits mean less buying in the open market. ICE EUA Dec-rolling prices have been under downward pressure as the combined scale of planned allocation increases has become clearer over the course of the Commission's review, and the consensus among carbon market participants has been running bearish.8,6
The industrial lobbying behind this shift has been sustained and coordinated. In late May (2026-05-28), Bulgaria, Czechia, Greece, Poland, Romania and Slovakia published a joint paper calling on Brussels to expand free allocation and overhaul parts of the ETS, POLITICO reported, framing it as necessary to protect EU manufacturing competitiveness against lower-cost rivals outside the bloc.3
A senior EU official told Montel on Thursday (2026-05-21) that total free allowances for 2026-2030 would run roughly 12% below the previous five-year total, with an estimated combined value of around EUR 200bn. But subsequent moves, including the benchmark revisions, the investment booster, and now the member state-backed 121 million increment, have been progressively closing that gap.1
The ETS covers around 40% of the EU's greenhouse gas emissions, placing a cap on carbon-intensive sectors including aviation, heavy industry and power generation. A Reuters-reported internal Commission document from Wednesday (2026-06-10) confirmed the broader review would extend free permit access to industries committing to invest within the bloc, tying additional allocation to in-EU capital deployment as a condition. The intent was to reduce the net cash burden on heavy emitters without fully removing the incentive to decarbonise.5,4
Yet the wider policy picture is not pulling in one direction. Ten member states raised concerns in July (2026-07-16) that the parallel ETS2 regime, covering transport and heating fuels, risks fresh costs for households already strained by energy price volatility, edie.net reported. ETS2 carries a cap designed to cut covered emissions 42% against 2005 levels by 2030.7
Climate commissioner Wopke Hoekstra described the overall package as "targeted improvements" to the ETS while maintaining "stable long-term signals," Montel reported. That framing satisfied almost nobody. Industry wants the reductions in paid allowances to go further. Environmentalists argue the free allocation expansion blunts investment in clean technology at precisely the moment when decarbonisation economics require carbon prices to hold firm.2
The practical test for EUA compliance positions is how strictly the investment conditions tied to free permits will be written. Those terms are still to be finalised. If they are loose enough to allow permit banking rather than genuine emissions cuts, the effective supply increase from the full range of announced changes may prove materially larger than any single announced figure suggests. That gap between declared intent and codified obligation is where carbon market participants will focus next.8,6