Nearly 80 industrial companies “across all sizes and sectors,” representing around half a million employees in Europe, are lobbying for an extension of free allocation under the EU Emissions Trading System (ETS) beyond the current phase-out date, amid the gradual implementation of the Carbon Border Adjustment Mechanism (CBAM).

According to a joint letter, the alliance is calling on European Commission President Ursula von der Leyen “to extend free allocation beyond the current phase-out dates, suspend the phase-out of free allocation through the CBAM for the time being, and refrain from including additional sectors.”

The letter also criticizes the CBAM, stating that “in its current form, it does not provide effective protection against carbon leakage,” adding that “it only covers a small fraction of the value chain and undermines the competitiveness of exports.”

Under current legislation, the gradual introduction of the CBAM is aligned with the phase-out of free allowances—starting next year and ending in 2034—since keeping both mechanisms in place could be viewed as overprotection of European industries and non-compliant with World Trade Organization (WTO) rules.

However, according to Voestalpine, one of the signatories, “the timeline is unrealistic.” The Austrian steelmaker warns that the mechanism “cannot yet replace free allowances,” as it offers “only partial protection against carbon leakage.”

The letter comes just ahead of an EU leaders’ summit in Brussels, where discussions will include “how to reach the EU’s climate objectives while supporting industries and citizens on the path to climate neutrality by 2050.”