Questions and answers on the EU Emissions Trading System benchmarks
Questions and answers on the EU Emissions Trading System benchmarks
Why is the Commission proposing updates to the EU ETS benchmark values?
The Commission is updating the benchmark values of the EU Emissions Trading System (EU ETS) for the period 2026–2030. This update belongs to a series of legal acts that need to be adopted to determine the level of free allocation for ETS industrial installations for the next years.
The Commission updates these benchmark values every five years and this is the case now for the upcoming 2026-2030 period as required under the ETS Directive (Article 10a(2)). This ensures the system remains up to date and the proper functioning of the market. Adoption of these updated benchmark values is expected by the end of June.
The updated benchmarks are based on the performance of the most efficient installations in each sector and ensure that free allocation continues to reward efficiency and provide incentives for industry to reduce emissions. This supports decarbonisation while maintaining competitiveness.
This update will ensure the timely issuance of free allocation for the year 2026. ETS operators already know the amount of allowances they need to surrender by 30 September 2026 for their emissions from the previous year. The publication of this Commission draft implementing act updating the EU ETS benchmark values will provide ETS operators with clarity on the amount of free allocation that will be allocated to them, thereby avoiding liquidity risks on the EU carbon market.
This measure is part of a broader effort to keep the EU ETS fit for purpose, maintaining its core design while strengthening its ability to deliver decarbonisation, competitiveness and energy security.
The EU ETS is delivering: it is reducing emissions, cutting Europe's dependence on imported fossil fuels and driving investment in clean, homegrown energy. At the same time, as recently highlighted by President von der Leyen at the March European Council, it needs to be modernised to remain effective, flexible and responsive to changing market conditions.
A comprehensive review of the EU ETS will follow in July 2026.
How will the benchmarks support Europe's competitiveness while delivering on the climate commitments?
Today's update of ETS benchmark values ensures that the EU ETS continues to deliver on its climate objectives while supporting competitiveness and investment in Europe with the necessary stability and predictability for industry.
This measure ensures that free allocation remains targeted to the most efficient installations. This rewards innovation and strongly supports companies that are leading in the transition, while helping maintain a level playing field for European industry.
How are you addressing concerns from the industry?
First, the Commission uses all the possible legal flexibility under the ETS Directive for the benchmark update. This concerns 14 product benchmarks which have previously covered indirect emissions from electricity use while free allocation was only given for direct emissions. To incentivise industrial electrification, with the revision of free allocation rules, free allocation under these benchmarks has been extended to indirect emissions. The ETS Directive does not specify a benchmark method to address this change and the Commission now proposes to continue considering indirect emissions for the benchmark setting. This leads to higher benchmark values with a financial impact of around €4 billion for the 2026-2030 period.
Second, by July 2026, the Commission will review the EU ETS to modernise it. To address concerns expressed by some industrial sectors, the Commission will propose in the upcoming ETS revision the introduction of sector-specific fallback benchmarks. This would be implemented through a specific empowerment allowing the Commission to define such sector-specific fallback benchmarks and establish a methodology for determining the respective benchmark values. To provide timely and effective support to the sectors concerned, the revised methodology should become applicable as early as possible.
Third, in designing the ETS investment booster, the Commission will build on the experience gained through the industrial heat decarbonisation auction by facilitating access for SMEs and by targeting industrial processes, such as heat at different temperatures levels, where tailored decarbonisation pathways are needed.
What is the role of biomass in setting the heat fallback benchmark?
The update of the heat and fuel benchmarks considers the emissions performance of the 10% best installations in 2021 and 2022. For a significant number of installations this performance is significantly better than the previous benchmark levels. This observation is valid across many sectors and across all Member States and regions.
Electrification, heat recovery and the use of sustainable biomass are the most relevant technologies driving this trend. In other words, there is no single technology that explains the benchmark trend, but a combination. Hence, the update of the heat fallback benchmarks would have been the same even without considering the contribution from biomass use.
For more information
Feedback to EU ETS benchmark values for 2026-2030 (link to implementing act)
