On 12 November 2026 the Council of the EU and the European Parliament reached a provisional agreement to increase the number of free carbon allowances available under the EU Emissions Trading System (ETS) for sectors covered by the heat and fuel (‘fallback’) benchmarks for the period 2026–2030. The measure is designed to protect energy‑intensive industries from carbon leakage while preserving incentives to decarbonise.
Details of the deal
The co‑legislators agreed a safety cushion of roughly 121 million free allowances in total. That builds on a Commission proposal that placed about 88 million allowances under the existing ETS rules; the Council and Parliament added around 28 million allowances that had been withheld because some installations failed to meet ETS conditionalities, and set aside a further 5 million allowances targeted at the most exposed sectors between 2026 and 2030. Any unused allowances will be redirected to the Modernisation Fund or the Innovation Fund.
The agreement covers the heat and fuel benchmarks — a fallback allocation stream used where product‑specific benchmarks do not apply — which the Council notes account for around 25% of total free allocation and protect sectors such as chemicals, glass, ceramics, pulp and paper and food processing. The provisional text will need final endorsement by both institutions, after which implementing rules for calculating heat and fuel benchmarks will be adopted; the roadmap foresees completion of the legislative package in the first quarter of 2027.
Industry context and reaction
Europe’s carmakers and suppliers have repeatedly warned that carbon‑cost exposure and other regulatory changes are affecting investment decisions and supply‑chain resilience. Industry association ACEA has called for pragmatic EU frameworks that safeguard competitiveness while enabling decarbonisation, and recent ACEA analysis has mapped structural dependencies in automotive supply chains that make energy and material costs a strategic issue for manufacturers and suppliers alike. Those concerns inform the political push to soften short‑term cost pressure on energy‑intensive suppliers.
What this means for the market
For Central and Eastern Europe the provisional ETS amendment matters because many regional supplier plants — steel, chemicals, plastics, glass and component factories — are energy‑intensive and are covered by heat and fuel benchmarks. The extra allowances reduce near‑term carbon exposure for those installations, easing operating costs and lowering the immediate risk that production shifts outside the EU for cost reasons. At the same time the measure is limited and time‑bound (2026–2030) and will be paired with continued decarbonisation incentives through EU funds, leaving long‑term pressure on suppliers to invest in cleaner processes.
Negotiations now move to legal‑linguistic revision and final adoption in Council and Parliament. Companies and governments in CEE that have been courting battery, supplier and assembly investment will watch the implementing rules closely: the calculation method for heat and fuel benchmarks will determine which installations qualify and how much relief they receive.
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Sources: Council of the European Union (Consilium), ACEA
