According to Carbon Market Watch, an NGO focused on climate policy and carbon markets, the revision of fallback benchmarks risks “entrenching the EU’s fossil dependency by reducing incentives to decarbonise.”

As part of the wider EU Emissions Trading System (EU ETS) review, the EU is updating its heat and fuel benchmarks, commonly referred to as “fallback benchmarks”, through a separate legislative process. These benchmarks determine the allocation of free emissions allowances to industrial activities that are not covered by product-specific benchmarks.

In July, the European Commission proposed amendments to Article 10a of the EU ETS Directive that would slow the reduction of free emissions allowances for certain industries, resulting in an estimated 80 million additional allowances worth around €6.4 billion.

This concession paved the way for further challenges to the proposed benchmark revisions. In September, the Council of the EU proposed further easing the benchmark rules, potentially granting industries 88 million additional free allowances worth €7 billion, plus another 33 million worth €2.6 billion through changes to conditionality requirements.

More recently, the European Parliament’s Environment Committee (ENVI) voted by a large majority in favour of an additional 99 million free allowances, worth around €8 billion, ahead of tomorrow’s plenary vote. While the proposal falls short of the Council’s in financial terms, Parliament also backed an urgent procedure to fast-track the legislation, drawing criticism from environmental organisations.

Critics argue that the accelerated process “does not allow proper scrutiny of the measures proposed by the Commission; measures that are set to reward those not investing in industrial decarbonisation, in spite of the availability of solutions.”

“Rather than a mechanism through which free allocation can be ‘maxed out’, the benchmark updates should reflect the actual pace of decarbonisation, to provide a real incentive to reduce industrial emissions and reduce Europe’s crippling fossil fuel dependency,” warned Carbon Market Watch.