Ahead of the European Commission’s comprehensive proposal to revise the EU Emissions Trading System (EU ETS), expected in July 2026, several key policy changes were reportedly discussed during a meeting on Wednesday between Commission President Ursula von der Leyen and EU commissioners.

According to a document seen by Reuters following the meeting, the Commission plans to extend free allocation beyond the previously scheduled phase-out period in exchange for industries investing in the bloc.

Current rules foresee a gradual phase-out of free allowances beginning this year, in parallel with the rollout of the Carbon Border Adjustment Mechanism (CBAM), with free allocation set to end entirely by 2034.

Furthermore, according to the internal document reviewed by Reuters, Member States will be required to allocate a larger share of revenues generated from emissions allowance auctions toward decarbonisation initiatives in sectors covered by the EU ETS.

Speaking at an industry summit in Antwerp in February, European Commission President Ursula von der Leyen expressed concern that Member States were investing less than 5% of EU ETS revenues in industrial decarbonisation, even though the proceeds are intended to support low-carbon investments and advance the green transition. She urged governments to increase their efforts, stating that “I believe it is high time that member states step up.”

The upcoming review of the EU ETS will also maintain the solidarity mechanism whereby 10% of auction revenues are allocated to lower-income Member States, helping them modernise their energy systems and accelerate industrial transformation.

Following the meeting, Executive Vice-President  Raffaele Fitto described the discussions as constructive, noting that the Commission would now focus on preparing the ETS review ahead of the July 15 deadline. As quoted by S&P Global, he stated that “the discussion and the contributions were very, very positive and important for this very crucial goal of July 15.”