EU tightens ETS benchmarks 2026–2030

The European Commission on May 11 proposed updated benchmark values under the EU Emissions Trading System for 2026-2030, opening a four-week public consultation before adoption. The benchmarks are the formulas used to calculate how many free carbon allowances industrial installations receive under the bloc’s carbon market. The Commission said the proposed update would leave industry, on average, with free allocation covering about 75% of emissions, while making full use of legal flexibilities available under the ETS rules. (malta.representation.ec.europa.eu) The proposal also keeps coverage of indirect emissions from electricity use across 14 product benchmarks, which the Commission said is intended to support industrial electrification. ### Which companies are affected when Brussels updates ETS benchmarks? The EU ETS covers industrial installations that receive free allowances to limit the risk of carbon leakage, and those allowances are calculated sector by sector using benchmark values. (malta.representation.ec.europa.eu) The Commission says 54 benchmarks — 52 product benchmarks and two fallback approaches based on heat and fuel — are used across manufacturing industry. The cleanest 10% of producers set the reference point for each benchmark, according to the Commission’s climate directorate. Installations that emit more than that benchmark must buy additional allowances to cover the gap, while installations that meet the benchmark can receive the allowances they need for covered emissions. (malta.representation.ec.europa.eu) ### What exactly changed for 2026-2030? The May 11 proposal updates the benchmark values that apply in the second allocation period of phase four of the EU ETS, which runs from 2026 to 2030. The Commission said benchmark values are revised periodically using company data so they reflect technological progress and reduce the risk of over-allocation. (climate.ec.europa.eu) The Commission said the revised approach results in higher benchmark values than would otherwise have applied, with a financial impact of about 4 billion euros over 2026-2030. Brussels said it was responding to concerns raised by industry and member states over competitiveness while staying within the flexibilities allowed by the ETS Directive. (malta.representation.ec.europa.eu) ### Why does a benchmark number matter to a steel mill or cement plant? Free allocation under the EU ETS is not set as a flat sector subsidy; it is tied to emissions intensity per unit of output. That means a steel mill, refinery, cement plant or chemicals site with emissions above the benchmark must either cut emissions or buy more allowances in the market. (malta.representation.ec.europa.eu) The Commission says benchmarks are designed around the principle of “one product = one benchmark,” meaning the methodology does not vary by technology, fuel, installation size or geography. That structure makes the benchmark update consequential for operating costs because the benchmark feeds directly into each installation’s free allocation. ### Does this proposal change the broader direction of the EU carbon market? (malta.representation.ec.europa.eu) The EU ETS remains in its fourth phase, covering 2021-2030, and the benchmark update is one part of a wider rewrite of free-allocation rules after the 2023 ETS reform. A 2024 Commission explanatory memorandum said the revision of the ETS Directive required corresponding updates to the rules for free allowances. The Commission linked the benchmark proposal to a separate amendment to the Market Stability Reserve presented on April 1 and to a broader EU ETS review due in July 2026. (climate.ec.europa.eu) Brussels said those steps are meant to keep the carbon market stable and ensure the system remains fit for future decarbonisation needs. ### What happens next, and when do the numbers become final? (climate.ec.europa.eu) The Commission said on May 11 that the proposed benchmark values are now subject to a four-week public consultation and scrutiny by member states in the Climate Change Committee. Under the EU’s implementing-act process, the Commission prepares the measure and submits it to member-state experts for an opinion before adoption. (climate.ec.europa.eu) By the end of June 2026, the Commission plans to adopt the benchmark values through an implementing act, and the resulting free allocation to industry is expected shortly afterward. In July 2026, Brussels is due to review the EU ETS more broadly, including whether the system’s current design still fits the bloc’s climate and industrial policy goals. (malta.representation.ec.europa.eu)