EU crafts plan to give industries extra free CO2 permits this year, diplomats say

By Kate Abnett

BRUSSELS, June 18 (Reuters) - The European Union plans to grant industry additional free CO₂ permits this year to quickly help companies compete with foreign rivals, according to EU diplomats and draft conclusions for a summit of EU leaders. The move could, however, allow firms to increase emissions.  

The plan responds to pressure from countries including Italy, Poland and the Czech Republic to loosen the EU's flagship climate change policy, the Emissions Trading System (ETS), when the Commission presents a revision of the scheme in mid-July.

Under the ETS, heavy industries have to buy permits to emit CO2, providing an incentive to emit as little as possible. But there is also a pool of CO2 permits firms get for free, and the Commission now intends to add to this allocation, despite opposition from some member states.

Draft conclusions for Thursday's EU summit, seen by Reuters, show EU leaders would endorse a plan for the Commission to present "a separate proposal to address concerns expressed by some industrial sectors on ETS benchmarks", alongside the overall revision of the ETS.

Diplomats told Reuters the cryptic wording referred to a deal done in Brussels earlier this week, in which the Commission agreed to propose quick changes to the rules determining how many free emissions permits the EU gives industries based on heat production and fuel use, called "fall-back benchmarks".

An EU document published on Monday confirmed the Commission had agreed to put forward "a separate proposal aimed at increasing the free allocation determined on the basis of the fall-back benchmarks".

The document said the deal would apply from 1 January 2026, which means that chemicals producers, refineries and other CO2 emitters could receive extra free CO2 permits this year.

A Commission spokesperson confirmed the details in the public document and declined to comment further. 

(Reporting by Kate Abnett, Editing by William Maclean)