EU softens carbon market rules to ease pressure on chemical industry
The European Commission is set to unveil its first proposals for reforming the EU Emissions Trading System (ETS) this Wednesday. The changes will include adjustments to help the chemical industry, following months of pressure from major companies and trade groups. Key modifications involve free CO₂ certificate allocations and the Market Stability Reserve (MSR). Earlier this year, Evonik CEO Christian Kullmann had called for either scrapping the ETS entirely or introducing sweeping reforms. He later co-wrote an opinion piece in Handelsblatt with EU lawmaker Peter Liese, pushing for practical solutions and balanced compromises.
The Commission's revised plan will now adjust benchmarks for free CO₂ certificate allocations, giving the chemical sector more certificates from 2026 onwards. This move responds directly to lobbying from industry bodies like the German Chemical Industry Association (VCI) and companies such as BASF. Originally, the EU intended to phase out free allocations by 2034, replacing them with the Carbon Border Adjustment Mechanism (CBAM). However, the new proposal may extend these allocations beyond that deadline.
Another significant change involves the MSR, where the EU will permanently remove the cancellation of certificates. This adjustment aims to stabilise prices and prevent artificial shortages, though critics argue it weakens the system rather than strengthening it. A full revision of the ETS is still expected in July, covering broader reforms.
The shift reflects a softer approach compared to earlier proposals, prioritising industry concerns over stricter climate measures. The reforms will provide the chemical industry with extended free allocations and greater price stability in the carbon market. The Commission's decision follows direct advocacy from key players, delaying the full transition to CBAM. Further details will emerge when the comprehensive ETS revision is published in July.
