European Union member states have backed a proposal to increase free carbon allowances for energy-intensive industries between 2026 and 2030, as part of wider efforts to address carbon leakage and maintain industrial competitiveness during the transition to a lower-carbon economy.

The Council of the EU agreed its negotiating position on measures that would provide around 121 million additional free emission allowances. The package combines approximately 88 million allowances available for free allocation with another 33 million that had previously remained unallocated because certain installations did not meet existing EU Emissions Trading System (ETS) conditions.

According to the European Commission, the measure could generate around €6 billion in cost savings for the affected energy-intensive sectors. Industries covered by the heat and fuel ETS benchmarks include areas such as chemicals, metals processing, ceramics and glass, which face significant exposure to carbon costs.

The additional free allowances are intended to reduce the risk of carbon leakage, where production and associated emissions could shift to regions with less stringent carbon constraints. The measure forms part of broader reforms to the EU ETS and reflects ongoing efforts to balance emissions reduction with industrial competitiveness.

The Council’s agreement is not yet the final legislation. Negotiations with the European Parliament will follow before the revised rules can be formally adopted.

The development highlights the continuing importance of carbon pricing, emissions management and regulatory preparedness for companies operating in energy-intensive sectors across Europe.