German, Italian and French industry groups unite to demand EU carbon market reform
Three major industrial federations have aligned for the first time against allowance shortages and price swings in the EU ETS, raising pressure on Brussels ahead of 2040 emissions legislation.
Germany, Italy, and France's main industry federations joined forces for the first time on Wednesday (2026-07-09) to demand an overhaul of the EU Emissions Trading System, warning that artificial allowance shortages and excessive price volatility were eroding industrial competitiveness, according to documents seen by Montel.5
That alignment across three countries is rare. EU business lobbying on carbon policy has long fragmented along national lines, with German manufacturers and Italian and French counterparts seldom speaking with a single voice. A joint declaration signals that industry displeasure with ETS mechanics has grown beyond what individual national petitions could address.5
The push comes as carbon prices sit at levels industry considers burdensome. The KRBN carbon ETF, which tracks EU allowance prices, stood at €78.80 on Friday (2026-07-10), flat on the day. That follows a period of political pressure: LSEG revised down its EUA price expectations in April (2026-04-23), citing growing industry advocacy to soften the scheme's industrial cost burden.3
Italy has been the most assertive national actor. Rome urged the EU earlier this year to scrap a planned revision to ETS benchmarks that govern free allowances to industry, arguing that moving ahead could raise compliance costs for energy-intensive sectors and weaken European competitiveness, Montel reported.1 Germany and France's formal alignment with that position marks an escalation.
The joint declaration's complaints cover two specific mechanics: artificial scarcity of allowances and excessive price volatility. Both point at the Market Stability Reserve, the mechanism designed to absorb surplus permits. Carbon traders have argued for years that the MSR over-corrects, draining liquidity and amplifying price swings beyond what underlying emissions trajectories require. The letter appears to be asking for a recalibration of how aggressively the MSR withdraws allowances.5
The Commission is simultaneously advancing ambitious legislation. It proposed a 90% emissions reduction target for 2040 in early July (2026-07-02), described as eye-wateringly ambitious but incorporating a three-percentage-point allowance for carbon removals rather than direct industrial abatement.2 The joint industry letter is, in effect, a bid to extract a concession at the market-design level before that framework is locked in — a demand that comes on top of Italy's existing push to scrap planned ETS benchmark revisions.1
On the supply side, the EEX exchange confirmed plans to halt REPowerEU carbon auctions once the €20 billion financing target is met, Carbon Pulse reported.4 Once that ceiling is reached, a source of additional supply that has weighed on EUA prices disappears, tightening the market's structural balance.
For carbon traders, the question is less about current price levels and more about the trajectory through the late 2020s. German power traded at €104.64 per megawatt-hour on Friday (2026-07-10), up 1.9%, while ICE Endex TTF front-month gas stood at €48.86. At those fuel prices, gas dispatch economics in European power are not constrained by EUA costs. But free allowance allocation phases down sharply after 2026 under the current schedule, and industry's case rests on that forward exposure.5
The Commission has not yet responded. A formal consultation on MSR design, if launched before the 2040 framework clears Parliament, could shift allowance market parameters for the rest of the decade. Free allocation falls on a schedule that was set before industrial federations began coordinating at this scale; the three-country coalition is betting that Brussels will move before that exposure fully arrives.5