The European Commission has announced a significant update to the European Union’s emissions regulation framework, expanding financial support mechanisms to help more energy-intensive industries comply with rising emissions-related costs.

Under the revised guidelines, EU member states will be permitted to grant compensation to a wider range of industrial sectors for part of the increased power costs associated with carbon pricing under the EU Emissions Trading System (ETS). This adjustment responds to pressure from industry groups and several member states concerned about the competitive impacts of stringent climate legislation and the risk of “carbon leakage,” whereby companies might relocate production to regions with weaker environmental regulations.

The updated rules extend eligibility for compensation to 20 additional sectors, including organic chemical manufacturing and specific operations in the ceramic, glass, and battery industries, reflecting the substantial rise in emissions-related costs and the broader set of industries now at risk.

The European Commission framed the changes as necessary to preserve the competitiveness of European industry while maintaining the bloc’s long-term climate objectives. Supporters of the policy argue that targeted compensation will help prevent job losses and economic relocation without undermining overall emission reduction goals. However, some environmental advocates warn that expanding compensation could dilute incentives for deeper decarbonisation.