Commission's EUR 6bn Free Permit Plan Keeps EUA Below EUR 80
The proposed ETS benchmark revision for 2026-2030 expands free allocations to industry, extending bearish pressure on a carbon market that sold the announcement before it landed.
The European Commission on Friday (2026-07-17) proposed revisions to EU ETS product benchmarks for 2026-2030 that would provide heavy industry with additional free carbon allowances worth EUR 6bn, confirming the direction markets had already begun pricing the session before. The draft covered changes to heating sector benchmarks and runs across the full five-year compliance period, the Commission said.7
ICE EUA Dec-rolling stood at €78.40/tCO2 in Friday (2026-07-18) pre-market data, below the EUR 80/t level it had held for much of 2026. Montel reported the contract shed 3% in Thursday (2026-07-16) afternoon trading, with dealers describing the sell-off as "nervousness" ahead of the Commission's package. At that scale of pre-positioning, the move was as much about what the announcement was expected to contain as what it ultimately confirmed.5
The proposal does not stand alone. Montel also reported the Commission proposed slowing ETS carbon cuts to a linear reduction factor of 3.7%, a measure that affects the pace at which the overall cap tightens across the economy. The ETS governs sectors accounting for roughly 40% of EU greenhouse gas emissions, including aviation, heavy industry and power generation. Slowing the cap's descent while expanding free allocations moves the system's supply-demand balance in the same direction.6,4
Under the revised benchmarks, industry was already expected to receive free allocations covering around 75% of its emissions, according to Gasworld reporting in May 2026. The Commission's EUR 6bn headline figure puts a value on the additional volume the latest revision adds on top of that baseline. At five years, the annual uplift averages EUR 1.2bn — material against an ETS that generated EUR 43.2bn in revenues in 2025 alone, up 11% on the year, according to an International Carbon Action Partnership study cited by Montel.2,7,1
Free permits reduce the pool of allowances operators must purchase. With more volume distributed at zero cost, marginal demand for EUAs shrinks. The sell-off on Thursday (2026-07-16) priced this dynamic before the formal announcement appeared, which raises the question not of whether the proposal is bearish but how much of the EUR 6bn effect has already been absorbed at €78.40/tCO2.5,7
Some of the near-term supply pressure has a defined end-point. The EEX exchange will halt REPowerEU carbon auctions once the EUR 20bn fundraising target is reached, the exchange's CEO confirmed in an interview cited by Carbon Pulse. That removes one discrete leg of the supply overhang. The benchmark revision, embedded in the five-year compliance framework, runs on a different clock.3
The legislative timeline now becomes the key variable. Commission proposals of this type move through member state consultation and parliamentary review before taking effect. If the benchmarks are confirmed as proposed and come into force before the 2026 compliance year begins, operators can plan around higher free allocation from the outset. If the process stretches or figures are revised during negotiations, the current price embeds an assumption that may shift in either direction.7
At €78.40/tCO2 on Friday (2026-07-18), ICE EUA Dec-rolling is pricing a regime with structurally more generous free allocations. Whether that assessment survives contact with the legislative calendar — and whether any pushback from the Parliament or member states reopens a path back toward EUR 80/t — is the variable the carbon market will trade through the rest of the summer.7,5