Finance
Industry asks EU to keep free carbon permits for longer
Published by Global Banking & Finance Review®
Posted on February 24, 2026
2 min readLast updated: February 24, 2026
Tags:European Union
Quick Summary
BusinessEurope asks the EU to keep and expand free carbon permits as Brussels revises the ETS. It opposes linking allowances to decarbonisation while the Commission weighs options ahead of a Q3 proposal.
EU Industry Urges Extension of Free Carbon Permits Amid ETS Overhaul
By Kate Abnett
BRUSSELS, Feb 24 (Reuters) - The European Union's top business lobby has urged the bloc to keep free carbon permits for industries, piling pressure on officials preparing a major overhaul of the EU carbon market.
EU ETS Overhaul and Free Allowances
Brussels is redesigning the EU's Emissions Trading System, its main climate tool, which forces power plants and factories to buy CO2 permits when they pollute.
Competitiveness and Political Pressure
The ETS has come under growing political pressure from leaders worried about Europe's faltering competitiveness, with some governments calling for a cut to the ETS price or even a pause to the system.
Free Permits Scheduled to End by 2034
A central issue in the upcoming review is whether to change the system of free CO2 permits that softens pollution costs for industries. Those permits are due to be phased out by 2034.
BusinessEurope's Call to Extend Free Permits
"The Commission should reconsider the planned phase-out of free allowances for all sectors," industry association BusinessEurope said in a position paper published on Tuesday.
Instead, the EU should look at expanding the list of sectors eligible for free permits, it said.
Germany and Poland Stakeholders
Member Associations: BDI and Lewiatan
Avoid Making Free Permits Conditional
BusinessEurope, whose members include national industry associations such as Germany's BDI and Poland's Lewiatan, also urged the EU not to make free permits conditional on companies investing in energy savings.
CBAM and Double Protection Concern
The demand adds to pressure on the Commission, which designed the ETS to end free permits as it rolls out a CO2 tariff on imported goods. Brussels has said keeping both systems would amount to double compensation for domestic industries, breaching World Trade Organization rules.
Commission Weighs Conditionality
An internal Commission document, previously reported by Reuters, showed officials are weighing options to overhaul free permits, including making them conditional on industrial decarbonisation.
Proposal Timeline: Third Quarter
The Commission aims to propose the ETS revision in the third quarter of the year.
(Reporting by Kate Abnett. Editing by Mark Potter)
Key Takeaways
- •BusinessEurope urges the EU to reconsider the planned phase-out of free CO2 allowances due by 2034.
- •The lobby wants more sectors to qualify for free permits rather than a narrowing of eligibility.
- •It opposes making free permits conditional on investments in energy savings or decarbonisation.
- •The Commission argues that keeping free permits alongside a CO2 import tariff could breach WTO rules.
- •Officials are weighing reforms to free allocations, with an ETS revision proposal due in the third quarter.
Frequently Asked Questions about Industry asks EU to keep free carbon permits for longer
1What is the main topic?
EU industry group BusinessEurope is urging the European Union to retain and expand free carbon permits as part of the upcoming overhaul of the Emissions Trading System.
2Why are free carbon permits controversial?
Free allowances lower costs for industries but can dilute incentives to cut emissions. Keeping them while introducing a CO2 border tariff risks ‘double compensation’ and potential WTO issues.
3When are free permits scheduled to end?
Under current plans, free CO2 allowances are due to be phased out by 2034, with reforms tied to the broader ETS redesign.
