August 9, 2026

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The European Post

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August 9, 2026

Newsletter

The European Post

Policy • Diplomacy • Strategic Insight

LATEST
New EU Gas Market Rules Take Effect With Consumer SafeguardsDeforestation Regulation Holds Its December Deadline Despite CutsDigital Omnibus Delays Europe’s High-Risk AI Deadline to 2027Europe’s Schools Confront a Widening Basic Skills GapRule of Law Report Finds Progress but Trust Still LagsIRIS2 Gains 66 Satellites as Brussels Signs the Rollout DealNature Restoration Plans Come Due as Member States Race a DeadlineECB Rates Hold at 2.25 Percent as Frankfurt Waits on the DataEU Budget Talks Turn to Cohesion as Ireland Takes OverWildfire Response Stretches Europe’s Emergency Fleet ThinCan Europe’s Quantum Plan Match Its Big Ambitions?Armenia Edges West as Moscow’s Grip Slips AwayEurope Inherits the World’s Aid Bill It Cannot Fully PayAir Passenger Rights Get Their First Overhaul in Two DecadesErasmus Opens a 5 Billion Euro Round for Skills and MobilityCeuta Crisis Pushes the EU Toward Faster Migrant ReturnsBulky Parcels Face a Packaging Crackdown From August 12Can Europe Build Its Drone Wall Before 2030 Arrives?Indonesia’s Trade Deal With Europe Nears Its Final SignatureEurope Leans on Beijing to Keep Climate Talks Alive Before AntalyaNew EU Gas Market Rules Take Effect With Consumer SafeguardsDeforestation Regulation Holds Its December Deadline Despite CutsDigital Omnibus Delays Europe’s High-Risk AI Deadline to 2027Europe’s Schools Confront a Widening Basic Skills GapRule of Law Report Finds Progress but Trust Still LagsIRIS2 Gains 66 Satellites as Brussels Signs the Rollout DealNature Restoration Plans Come Due as Member States Race a DeadlineECB Rates Hold at 2.25 Percent as Frankfurt Waits on the DataEU Budget Talks Turn to Cohesion as Ireland Takes OverWildfire Response Stretches Europe’s Emergency Fleet ThinCan Europe’s Quantum Plan Match Its Big Ambitions?Armenia Edges West as Moscow’s Grip Slips AwayEurope Inherits the World’s Aid Bill It Cannot Fully PayAir Passenger Rights Get Their First Overhaul in Two DecadesErasmus Opens a 5 Billion Euro Round for Skills and MobilityCeuta Crisis Pushes the EU Toward Faster Migrant ReturnsBulky Parcels Face a Packaging Crackdown From August 12Can Europe Build Its Drone Wall Before 2030 Arrives?Indonesia’s Trade Deal With Europe Nears Its Final SignatureEurope Leans on Beijing to Keep Climate Talks Alive Before Antalya

Carbon Market Overhaul Hands EU Industry More Free Allowances

Maya Plisetskaya
Institutional Affairs Reporter, Energy and Climate

Brussels: The European Commission is preparing the biggest carbon market overhaul since the system launched, with a revision of the EU Emissions Trading System due in mid-July 2026 that would hand energy-intensive industry a longer supply of free pollution permits. Officials confirmed the proposal would land around 15 July, opening a fight over how fast Europe forces its factories to decarbonise.

The carbon market, formally the EU Emissions Trading System, puts a price on each tonne of carbon dioxide that power plants, steelmakers, cement kilns and refineries emit. Companies must buy or receive allowances to cover their pollution, and the Commission tightens the supply every year to push emissions down. That mechanism now sits at the centre of the bloc's drive to cut net greenhouse gases by 90 percent by 2040.

Under the draft benchmarks, industry would keep free allocations covering roughly 75 percent of its emissions across 2026 to 2030. The Commission estimates the softer trajectory could save manufacturers around four billion euros in carbon costs over the next few years. Backers argue that breathing room protects jobs while the Carbon Border Adjustment Mechanism, the bloc's levy on carbon-heavy imports, ramps up to shield European plants from cheaper foreign rivals.

Critics see a retreat. Free allowances were meant to shrink from this year and vanish by 2034, while auctioning was set to end in 2039. Stretching both timelines slows the emissions cuts that the carbon market is supposed to deliver, and climate campaigners warn that every delayed tonne makes the 2040 target harder to reach. The centre-right European People's Party has pushed hardest to soften the rules for heavy industry.

The politics are tangled because the same reform touches the Carbon Border Adjustment Mechanism. As the border levy starts charging importers for their emissions, it reduces the justification for giving domestic firms free permits at all. Lawmakers must decide how quickly one tool replaces the other without leaving exporters exposed on world markets.

The Commission has tried to answer industry anxiety with cash as well as rules. It recently disbursed 2.5 billion euros from the Modernisation Fund to back 51 energy projects across 11 member states, part of a wider push to accelerate clean electrification and cut dependence on imported fossil fuels. The Commission set out that logic in its plan to shield Europeans from the fossil energy crisis.

Once the text appears, the European Parliament and member states will negotiate the details, with adoption unlikely before early 2027. Governments with large industrial bases, including Germany, Poland and Italy, want generous transition terms, while several northern states insist the bloc cannot dilute its own climate law. The design of the EU Emissions Trading System will shape investment decisions in steel and chemicals for a decade.

For now, the carbon market remains Europe's most powerful climate lever and its most contested. The July proposal will reveal whether the Commission still trusts the price of carbon to drive the transition, or whether it has decided that protecting industry today matters more than the emissions bill that arrives tomorrow.

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