October 20, 2026

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The European Post

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October 20, 2026

Newsletter

The European Post

Policy • Diplomacy • strategic insight

LATEST
EU-UK Summit Hangs On Youth Scheme And Carbon Market LinkBlack Sea Shipping Attacks Put EU Maritime Hub To The TestStock Options Split Governments Over EU Inc 28th Regime MandateCouncil Seals Return Regulation With Return Hubs And Entry BansParcel Handling Fee Lands By 1 November On Low-Value EU ImportsIndia Trade Agreement Heads Into The Council’s Signing QueueBosnia EU Accession Stays Frozen After A Record Low Turnout VoteForeign Investment Screening Regulation Binds Every StateImporters Face EU Deforestation Regulation On 30 DecemberMînzatu Pushes The EU Anti-Poverty Strategy Toward 2030EU Budget Fraud Protection Shifts To National Anti-Fraud ServicesCohesion Policy Row Splits Fitto And Regions Over The 2028 BudgetIn-Game Virtual Currencies Draw EU Action Against Nine StudiosAnnual Euro Area Inflation Hits 3.8 percent As Energy Prices ClimbFRTB Market Risk Rules Await Parliament Scrutiny Before 2027EDIP Defence Funding Backs Eight Plants Making Missile FuelInnovation Act Lets Start-Ups Borrow Against Patents And IP RightsPublic Procurement Act Replaces Three Directives With One RuleGeorgia EU Candidate Status Frays After Parliament Sanctions CallIndonesia EU CEPA Signing Hinges On GSP Deadline And Text LanguageEU-UK Summit Hangs On Youth Scheme And Carbon Market LinkBlack Sea Shipping Attacks Put EU Maritime Hub To The TestStock Options Split Governments Over EU Inc 28th Regime MandateCouncil Seals Return Regulation With Return Hubs And Entry BansParcel Handling Fee Lands By 1 November On Low-Value EU ImportsIndia Trade Agreement Heads Into The Council’s Signing QueueBosnia EU Accession Stays Frozen After A Record Low Turnout VoteForeign Investment Screening Regulation Binds Every StateImporters Face EU Deforestation Regulation On 30 DecemberMînzatu Pushes The EU Anti-Poverty Strategy Toward 2030EU Budget Fraud Protection Shifts To National Anti-Fraud ServicesCohesion Policy Row Splits Fitto And Regions Over The 2028 BudgetIn-Game Virtual Currencies Draw EU Action Against Nine StudiosAnnual Euro Area Inflation Hits 3.8 percent As Energy Prices ClimbFRTB Market Risk Rules Await Parliament Scrutiny Before 2027EDIP Defence Funding Backs Eight Plants Making Missile FuelInnovation Act Lets Start-Ups Borrow Against Patents And IP RightsPublic Procurement Act Replaces Three Directives With One RuleGeorgia EU Candidate Status Frays After Parliament Sanctions CallIndonesia EU CEPA Signing Hinges On GSP Deadline And Text Language

ETS Free Allocation Fight Pits Industry Relief Against Carbon Price

Atli Samper
Policy Watch Editor, Energy and Climate

Ostrava: The fight over ETS free allocation moved up the political agenda this autumn, as EU leaders met in Brussels on 15 and 16 October 2026 with competitiveness first on their agenda. The Emissions Trading System was not a separate item, yet industrial carbon costs hang over the whole discussion. Any change to the rules still needs legislation agreed by the European Parliament and the Council.

The pressure came from two capitals. On 30 September 2026, Italy and Czechia sent the Commission a joint paper warning that high energy prices, high carbon costs and high fuel prices risk further weakening European manufacturing. The letter says a full suspension of the carbon market would bring immediate relief but lacks sufficient support, so it proposes targeted alternatives instead.

The list is specific. Italy and Czechia want a pause in further cuts to ETS free allocation for sectors covered by the Carbon Border Adjustment Mechanism, together with a review of the benchmarks. They also want the Market Stability Reserve to reduce or suspend withdrawals of about 190 million allowances due between September 2026 and August 2027. Other ideas include limits on how carbon costs pass into electricity prices, more transparency in the allowance market and a postponement of ETS2 for buildings and road transport.

The Commission has its own proposal on the table, presented on 17 July 2026. It would slow the reduction of ETS free allocation for CBAM sectors and extend the phase-out to 2038. It would also provide extra free allocation worth €6 billion for 2026 to 2030 and reform the Market Stability Reserve to reduce excessive price volatility. Environment ministers debated that review on 12 October.

Prices explain the anxiety. The Commission puts the average allowance price for April to September 2026 at €78.93 per tonne of CO2 equivalent. Installations covered by the system pay that price directly, partly offset by free allocation, while electricity buyers pay carbon costs indirectly through power prices. Under the Commission’s proposal, ETS free allocation from 2031 would depend on decarbonisation investment plans, which ties relief to investment rather than to output alone.

Industry and climate advocates read the same numbers differently. Manufacturers argue that slower cuts to ETS free allocation protect jobs and keep production in Europe while CBAM matures. Climate groups warn that each concession weakens the price signal that drives investment in cleaner steel, cement and fertiliser. ETS2, which covers fuels for buildings and road transport from 2028 after a one-year postponement agreed in December 2025, adds a second political fault line.

Leaders could fast-track parts of the Commission proposal, ask for extra short-term measures or keep their conclusions general. Whichever route they take, the detail will be settled in legislation, and the fight over ETS free allocation will move to the Parliament and Council working rooms. The result will tell industry how much relief it can count on and tell investors whether the carbon price remains a reliable signal.

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