As part of the wider review of the EU ETS, but through a separate legislative process, the EU is revising the heat and fuel benchmarks, known as “fallback benchmarks”, which apply to industrial activities not covered by a specific product benchmark.

In July, the European Commission proposed adjusting these benchmarks for the 2026–2030 period, potentially resulting in around 80 million additional allowances being allocated free of charge.

The proposal aims “to address concerns expressed by certain industrial sectors in the context of updating the benchmark values until 2030 and provide additional protection against the risk of carbon leakage.”

This week, member states agreed to make around 88 million allowances available for additional free allocation, representing an estimated €6 billion in cost savings for the sectors concerned, according to the Commission.

The Council went further by adding another 33 million allowances “that have not been previously allocated due to installations not meeting existing ETS conditionalities.” This would bring the total available under the Council’s position to around 121 million allowances.

“By giving more free allowances for energy-intensive sectors during this crucial transition period, we are safeguarding jobs and ensuring that our industries remain competitive, while we work towards our ambitious climate goals,” said Darragh O’Brien, Ireland’s Minister for Climate, Environment and Energy and Minister for Transport. Ireland currently holds the rotating presidency of the Council of the EU.

The European Parliament is expected to vote on its position on the new heat and fuel fallback benchmarks at a forthcoming plenary session. On 15 September, MEPs agreed to fast-track the proposal under Parliament’s urgent procedure, paving the way for an accelerated vote and subsequent negotiations with the Council.