EPP Floats Free ETS Permits for Power Generators in Crisis Carve-Out
The centre-right group's draft position would exempt power companies from buying carbon allowances during supply crises after 2030, sharpening the fight over the EU's post-2030 carbon market design.
The European Parliament's largest political group is preparing to back a significant break from the EU's carbon trading architecture. The centre-right EPP would support free ETS allowances for power generators after 2030 in crisis situations, according to an early draft negotiating position seen by Montel on Monday (2026-06-29).4
The timing is pointed. The European Commission's climate commissioner, Wopke Hoekstra, said last month (2026-05-21) that Brussels would propose "targeted improvements" to the EU emissions trading system while maintaining "stable long-term signals" in a review due in July.1 The EPP's draft lands ahead of that review, sharpening the political contest over what the post-2030 carbon market should look like.4,1
At stake is whether power generators, currently required to purchase all their allowances at auction, would receive free permits when prices or supply conditions breach some crisis threshold. The ETS debate has already drawn calls from governments in high-cost markets for mechanisms that separate electricity prices from carbon costs. Gas-fired plants have set the marginal clearing price in 89% of European power hours so far in 2026, according to Ember data, though Spain was an outlier at 15%.3
ICE Endex TTF front-month gas was trading at €42.42 per megawatt-hour on Monday (2026-06-29). The scale of regional divergence in power costs illustrates the political pressure: Italy's average power price reached €142 per megawatt-hour in March (2026-03), versus €59 in Spain over the same period, Ember analysis showed.3
Those price gaps have made the EPP's draft position politically attractive to governments in net-importing, gas-exposed markets.3 If generators in high-cost regions receive free permits during crisis periods, the carbon pass-through to consumers is reduced, at least temporarily.
But the ETS was designed to maintain that pass-through as a price signal. Free allowances to electricity producers would reduce the cost advantage of lower-carbon generation at exactly the moment when the market is supposed to drive dispatch choices. Where gas-fired plants are receiving free permits, the financial incentive to build or run alternatives shifts accordingly.4,3
A separate strand of the Parliament debate concerns the infrastructure required to reduce regional price divergences in the first place. The EPP's lead negotiator on a related electricity regulation called last month (2026-05-21) for electricity TSOs to set aside 35% of their excess congestion income to increase cross-border transmission capacity, up from 25% proposed by the European Commission.2 More interconnection would narrow the gaps between high- and low-cost markets, removing some of the pressure for ETS carve-outs.
The EPP position is described as an early draft. Whether it survives formal negotiations depends on how Brussels frames its own July review proposals and whether the Parliament's centre-left groups accept a carve-out that climate advocates argue amounts to a support mechanism for gas generation.1,4
The crisis trigger definition is what will determine the proposal's practical effect. A narrow threshold leaves it largely symbolic; a broad one establishes a precedent for carbon market intervention that subsequent high-price episodes would test against.4