As part of the broader EU ETS review, the EU is revising the heat and fuel benchmarks, known as “fallback benchmarks”, through a separate legislative process. These benchmarks determine free allocations for industrial activities not covered by a specific product benchmark.

In July, the European Commission proposed revisions to the benchmarks for the 2026–2030 period, which would result in approximately 80 million free allowances. However, on Monday, the European Parliament’s Environment Committee (ENVI) voted by a large majority to increase this amount.

ENVI members voted to make full use of the allowances available for free allocation during this period, currently estimated at around 88 million. They also backed the inclusion of an additional 11 million allowances “withheld from installations that failed to meet ETS conditions, for instance did not implement energy audit recommendations”, bringing the total to approximately 100 million allowances.

According to rapporteur Adam Jarubas, “by increasing the free allocation proposed by the Commission, the Committee recognises, with broad support, that certain sectors need stronger protection against carbon leakage.”

Parliament is handling the revision of the fallback benchmarks under its urgent procedure and is expected to vote on its position in plenary on Thursday, 22 October, paving the way for negotiations with the Council.

In September, the Council adopted a position proposing an even larger increase in free allocations, adding 33 million allowances and bringing the total to approximately 121 million. The legislative process is expected to be completed in time for the revised benchmark values to apply from 2027.