A technical update to EU ETS heat & fuel benchmarks has become a multi-billion-euro giveaway to polluting industry.

Updating the EU ETS fallback benchmarks – i.e.  the formulas that decide how many free pollution permits heavy industry receives for burning fossil fuels and heat – should be a technical exercise to reflect industrial decarbonisation progress. Instead, EU policymakers have turned it into a political mechanism to maximise free allowances for industry. By reopening rules that had only just been agreed, they are putting an estimated €10-13.6 billion in additional allowances on the table. By doing this, the proposal further weakens the carbon price signal and rewards business as usual.

This is happening just as Europe needs to accelerate industrial electrification, cut its dependence on fossil fuels and channel investment into cleaner production. More free allowances mean weaker incentives to decarbonise and fewer resources that could otherwise be raised through auctioning to support the transition. And by retroactively changing the rules, policymakers are undermining the predictability that industries need to invest in the future.

Not all industrial processes are alike, and genuine differences between sectors should be addressed. But targeted, evidence-based benchmarks are no excuse for a blanket handout. Our briefing exposes how a technical update has become another round of industry subsidies and why EU policymakers must choose climate integrity, transparent rules and industrial decarbonisation over maximising free allocation.