- Eastern and southern EU countries are challenging reforms to the EU Emissions Trading System (ETS). Bulgaria, Czechia, Greece, Poland, Romania and Slovakia want to freeze the volume of free carbon permits allocated to industry at 2025 levels rather than allow a planned phase‑down.
- The six governments argue that high energy prices linked to the Iran war threaten competitiveness and jobs, and that reducing free allowances could prompt carbon‑intensive industries to relocate overseas.
- Spain and Sweden oppose the freeze, warning it would weaken the ETS. The dispute highlights divisions within the EU ahead of a scheduled July revision of the ETS rules.
As part of its “Fit for 55” package, the EU plans to tighten its Emissions Trading System by gradually reducing free allowances for industrial emitters and introducing a Carbon Border Adjustment Mechanism.
The reduction is designed to incentivise decarbonisation while ensuring that industries face a carbon price similar to their competitors outside the bloc. However, six countries led by Poland and Bulgaria are pushing back, according to reports.
In a joint statement, the countries said free allocations should be frozen at current levels for several years because record‑high electricity prices and inflation are squeezing manufacturers. They warned that cutting allowances too quickly could “risk the loss of millions of jobs”.
The European Commission has proposed gradually reducing free allowances from 2026 through 2034, arguing that companies have already received significant support. Spain, Sweden and other northern states back the proposal, saying that delaying reductions would undermine the carbon market’s integrity.
Negotiations continue, with final rules expected by the end of June and a broader ETS revision scheduled for July. The conflict underscores the difficulty of balancing climate ambition with energy‑price pressures and industrial competitiveness.
For UK observers, the outcome matters on two fronts. First, Britain’s own ETS is linked informally to the EU’s via trade; a weaker EU carbon price could depress UK prices. Second, if the EU delays cuts to free allowances, UK manufacturers exporting into the bloc may face slower increases in carbon costs, but it could also reduce incentives to invest in cleaner technology.
