EU negotiators agreed overnight on Thursday to allocate around 120 million additional free carbon certificates to heavy industry for 2026 to 2030.
The provisional deal between the European Parliament and the Council of the EU goes beyond the European Commission's July proposal. The Commission had suggested around 88 million free allowances, which it estimated would save affected sectors about six billion euros. Climate Commissioner Wopke Hoekstra put the value of the additional allowances in the new agreement at 10 billion euros.
The certificates form part of the EU Emissions Trading System (ETS), the bloc's central climate policy tool. Under the ETS, companies in energy-intensive sectors must hold certificates for each tonne of CO2 they emit. To prevent carbon leakage, certain sectors receive free certificates. The new allocation covers 2026 to 2030. It targets sectors such as chemicals, steel and glass. Other covered industries include pulp and paper, food and ceramics.
The 120 million certificates consist of several components. Negotiators added 28 million allowances that had not been allocated previously. The installations failed to meet ETS conditionality requirements, such as energy efficiency audits or climate neutrality plans. A further five million allowances are reserved between 2026 and 2030 to protect sectors highly exposed to carbon leakage. Unused allowances from this mechanism will support investments through the Modernisation Fund and boost innovation via the Innovation Fund.
The agreement still requires formal approval by the European Parliament and the Council. Once ratified, the Commission will adopt implementing acts setting detailed benchmark values for heat and fuels. These benchmarks account for about 25 percent of the free allocation pool in the ETS. They are set based on the average emissions of the 10 percent most efficient installations in the EU for each technology. Polish MEP Adam Jarubas, the Parliament's rapporteur, said the compromise responds to sharp cuts in free allocations after emission benchmarks were updated in June. He said it opens the door to sectoral benchmarks for industries such as ceramics.
Hoekstra said the agreement "sends a clear signal to European industry: Europe is listening and offers solutions." He added that it "contributes to protecting our industrial competitiveness and keeps the carbon market strong and fair." Irish Climate Minister Darragh O'Brien said the amendment provides predictability for the sector's sustainable transition. He said it maintains competitiveness in the internal market and keeps production within the EU.
The EU aims to cut greenhouse gas emissions by 90 percent by 2040 compared with 1990 levels. The Commission proposed further ETS adjustments in July to support industry facing high energy prices and foreign competition.
