Ahead of the publication of the European Commission’s review of the EU Emissions Trading System (EU ETS), now scheduled for 17 July after being postponed from 15 July, reports and media headlines are beginning to shed light on the proposals under consideration.

According to an anonymous European Commission official quoted by Reuters, the EU executive is considering granting industries additional free carbon allowances, provided they invest in decarbonisation. The plan could grant companies an additional €6 billion ($6.85 billion) in free permits between 2026 and 2030, the official said.

In addition, the Commission is expected to propose accelerated revisions to the methodology used to allocate free emissions allowances to industry, including the criteria linked to heat generation and fuel consumption.

Besides expanding free allocation, the Commission is also considering allowing industry to continue emitting beyond 2040. Under the current rules, the linear reduction factor (LRF)—the annual rate at which the European Union lowers the emissions cap under the EU Emissions Trading System (EU ETS)—is set at 4.3%, increasing to 4.4% from 2028 onwards. At this pace, the cap would effectively reach zero by 2039.

The proposal is also expected to require Member States to dedicate a larger share of EU ETS revenues to supporting industrial decarbonisation. The additional spending could be significant, as a recent study by Carbon Market Watch estimates that the EU ETS will generate between €120 billion and €150 billion in auction revenues for Member States between 2026 and 2030, assuming an allowance price of €75–95 per tonne of CO₂.

The Commission’s emerging proposals also appear to move in the same direction as those put forward by the European People’s Party (EPP), the largest political group in the European Parliament. A leaked position paper seen by Reuters a day earlier similarly signals growing political support for a more gradual reduction in emissions under the EU ETS, extended free allocation for industry, and greater use of ETS revenues to support industrial decarbonisation.