Six EU countries seek more free carbon permits for heavy industry

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EU carbon permits for industry

Highlights

Czech Republic, Bulgaria, Poland, Romania, Greece, and Slovakia urge the EU to increase free carbon allowances in the ETS for industries committing to emissions cuts, with relief to take effect before 2030.
The six countries object to revised sector benchmarks that raise free allowances by an extra 4 billion euros from 2026–2030 but cut heat and fuel sector permits by 50%, warning this could raise costs for industries facing high energy prices.
Reworking ETS benchmarks may require reopening legislation, risking delays, political sensitivity, and potential weakening of EU climate targets while threatening national government ETS revenues if reforms stall.

Push for earlier and broader ETS relief

As first reported by the Financial Times, the Czech Republic, Bulgaria, Poland, Romania, Greece and Slovakia urge the EU to increase free carbon allowances under the emissions trading system for industries that commit to verifiable emissions cuts.

In a letter seen by the newspaper, the countries say companies trying to shift to cleaner production should receive additional free permits, with mid- and lower-income member states given preference because they are more exposed to the energy crisis. A diplomat says the six countries want the process to be fast-tracked so the added support takes effect before 2030.

The request adds to broader pressure on the ETS, which is designed to spur decarbonisation by requiring companies to buy or hold allowances covering their CO2 emissions. The system is already reducing the number of free permits over time, increasing costs for industrial groups that have been facing high energy prices linked to conflict in the Middle East.

Review raises stakes for industry and climate policy

The letter arrives while the European Commission reviews the ETS as part of the EU’s path to carbon neutrality by 2050. Officials plan to grant more free allowances to industry, but they say tighter conditions are needed so companies show how they reinvest support into decarbonisation.

The six member states also criticize the Commission’s revised sector benchmarks, under which free allowances rise by an extra 4 billion euros from 2026 to 2030 but fall sharply for some sectors. They object in particular to a 50% cut in allowances for heat and fuel sectors, arguing that the change could significantly raise effective carbon costs for a wide range of industries already under strain from exceptional energy prices and global competition.

Any move to rework benchmark calculations could require reopening ETS legislation, a lengthy and politically sensitive process that may weaken Europe’s climate ambitions further. At the same time, officials warn that if the new benchmarks are not adopted quickly, member states risk losing ETS revenue, most of which flows back to national governments.

Our earlier report on rising UK inflation risks highlighted how higher energy costs were again squeezing household budgets and could push inflation higher later in the year. We also noted the knock-on impact on retailers and consumer demand, as weaker wage growth and persistent cost pressures weighed on spending.

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