EU, new ETS: free allowances beyond 2030 for businesses at risk of relocation

Over the past twenty years – that is, since its inception – the ETS market has generated revenue of 260 billion euros. This money has often been used to bolster Member States’ public finances. The European Commission is proposing that, from now on, at least half of the revenue must be used to fund decarbonisation projects. “Currently,” explained Commissioner Hoekstra, “barely 10 per cent of the revenue is spent on industry.”

In this regard, 80 per cent of the allowances allocated free of charge will only be made available to companies once they have published concrete annual decarbonisation plans. The remaining 20 per cent will be allocated only once the companies’ plans have been effectively implemented. The aim, once again, is to use the ETS not only to incentivise environmentally friendly economic activities, but also to support new investment.

Furthermore, the European Commission proposes to gradually incorporate waste management into the ETS as well. The reform includes a number of safeguards to address the sector’s concerns. Recently in Brussels, representatives of several large companies, such as the French firm Veolia and the Italian firm ACEA, pointed out that the client commissioning waste management services is often a public body and that companies in the sector do not have control over the input.

Finally, the reform provides for the expansion of the ETS market to include private flights and commercial flights up to 5,000 kilometres from the centre of Europe and, in the maritime sector, to certain ports in third countries within Europe’s wider neighbourhood. “We must abandon the idea that the climate and the economy cannot go hand in hand. In fact, they can go hand in hand,” explained Commissioner Hoekstra, whilst also noting that European industry is deeply divided on how to assess the ETS market.

Ultimately, the reform put forward by Brussels reflects the recent trend towards watering down the Green Deal. It weakens “the most effective tool for climate protection”, notes Mats Engström, an expert at the European Council on Foreign Relations. Business Europe, on the other hand, argues that the conditions attached to obtaining free allowances “risk increasing bureaucratic complexity”. Meanwhile, the European airline association A4E warns that there will be an increase in ticket prices, without any benefits for the environment.

Still on the energy front, the European Commission has also proposed an ‘indicative’ target for the electrification of the economy of 46 per cent by 2040. Currently, the share of electricity in final energy consumption has remained at 23 per cent for a decade. In this regard, by 2030, the cost of electricity must not exceed two and a half times the price of gas for households, or more than twice the price of gas for industry. This latter issue is a tricky one because the tax authorities require unanimity among member states.
(This article was updated at 09:35 on 18 July 2026)