EU member states have given backing to proposals for additional free emission permits for energy-intensive industries in the coming years, an effort to shield struggling domestic firms and preserve their global competitiveness, according to a statement from the Council of the EU on September 16.

Under the position endorsed by the Council of the EU, industries will receive an extra 121 million free CO2 permits over 2026-2030, calculated according to their heat output and fuel consumption.

Reuters estimates the measure could cut industrial carbon-related costs by around €8.25 billion ($9.47 billion), with the proposed volume of free allowances exceeding the European Commission's original draft proposal. Chemical producers, metal processors as well as ceramics and glass manufacturers are set to be the main beneficiaries.

Within the EU Emissions Trading System (ETS), heavy industry operators are generally required to purchase permits for their CO2 emissions, creating incentives for emission cuts.

A pool of free allowances is maintained to mitigate carbon leakage risks, so European firms can better compete against overseas peers that bear no comparable carbon cost burdens. The new scheme will temporarily expand this free allocation pool, even though the broader ETS framework envisages a gradual phase-down of free permits to drive emission reductions over time.

Member states will now enter negotiations with the European Parliament over the final wording for the so called ETS "fall-back benchmarks". Lawmakers are fast-tracking these talks aiming to seal a full agreement before year-end. Separately, the EU is negotiating wider-ranging reforms to the ETS, with a target to reach a deal in 2027.