The European Commission is considering increasing the number of free CO2 permits available to industry under the EU Emissions Trading System (EU ETS), according to a document seen by Reuters. The move could save European companies around €4 billion (~$4.7 billion) in carbon costs over the coming years.
The proposal comes as policymakers face growing pressure from heavy industry over rising costs and global competitiveness. Sectors such as steel, cement and chemicals have warned that high energy prices and carbon costs are impacting their ability to compete internationally.
Thus, the draft plan aims to ease financial pressure while maintaining the EU’s core carbon pricing framework.
Including Indirect Emissions in Permit Allocation
Under the current system, companies receive free permits based on their direct emissions. The proposed change would also take into account indirect emissions, such as those linked to purchased electricity.
Including these emissions in the calculation could increase the number of free allowances allocated to certain industries. According to internal documents, the adjustment could provide around €4 billion in additional free permits between 2026 and 2030.
The Commission is expected to present the proposal in the coming weeks, with a final decision anticipated by June. The plan reflects a broader shift in the EU’s climate policy approach.
While the bloc remains committed to reducing emissions, there is increasing focus on balancing decarbonization with industrial competitiveness.
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Several member states have raised concerns about weak economic growth and the risk of investment shifting outside Europe. At the same time, industry groups have called for measures to offset rising compliance costs.
Expanding free permits could provide short-term relief for companies in hard-to-abate sectors. However, the approach may also raise questions about the long-term strength of the EU’s carbon pricing system.
Despite potential changes, companies are still expected to invest in low-carbon technologies and emissions reductions.
The development highlights the growing complexity of Europe’s climate policy, as economic and political pressures reshape the path to decarbonization.
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