Ten EU Leaders Call for Carbon Market Reform and Free Quotas Beyond 2034

Italian Prime Minister Giorgia Meloni and nine other European Union leaders sent a joint letter to the European Commission on March 18, 2026, calling for a review of the bloc's carbon market and the continuation of free emissions allowances beyond 2034. The letter, signed by the heads of government of Italy, the Czech Republic, Greece, Hungary, Poland, Romania, Slovakia, and Belgium, with additional support from Austria and Bulgaria, requested "urgent action" to protect strategic industrial sectors from competitive disadvantage. The signatories argued that the ETS is only effective if it shields European industry from the risk of carbon leakage while maintaining sufficient free quotas to support companies that cannot pass decarbonization costs on to customers.

Steel, metals, and chemicals sectors cited as most at risk The letter argued that European steel, metal, and chemical sectors have made significant progress in reducing greenhouse gas emissions but face a difficult business environment, with higher production costs and lower sales prices than international competitors. The signatories stated that free carbon quotas must remain available beyond 2034 to support companies during the transition phase, particularly those unable to transfer decarbonization costs downstream. Polish Prime Minister Donald Tusk, one of the letter's signatories, pressed the European Union to maintain free carbon permits for industry, according to Reuters. The joint appeal reflects growing concern among a broad coalition of EU member states that the current trajectory of carbon pricing policy threatens the viability of energy-intensive industries. The letter called on the Commission to act with urgency, framing the issue as one of both industrial competitiveness and the credibility of the EU's decarbonization strategy.

The EU Emissions Trading System was established in 2005 as the world's first major carbon market. It operates by capping total emissions from covered sectors and requiring companies to hold allowances for each tonne of carbon dioxide they emit. Free allowances have historically been distributed to energy-intensive industries to prevent carbon leakage — the risk that production shifts to countries with less stringent climate rules. The phase-out of free allowances for most sectors is tied to the introduction of the Carbon Border Adjustment Mechanism, which is designed to impose equivalent carbon costs on imports. The future of free quotas beyond 2034 has become a central point of contention as the EU revises its industrial and climate policy framework.

Confindustria chief calls for full ETS suspension in German press Emanuele Orsini, president of Confindustria, went further than the joint letter in an interview published by the Frankfurter Allgemeine Zeitung, stating that Europe is in an "emergency situation" and should suspend the ETS entirely. Orsini's call for a full suspension represents a more radical position than the one outlined by the ten EU leaders, who sought a reform rather than an outright halt to the carbon market. The Italian business federation's stance reflects pressure from industrial groups across Europe who argue that the current system imposes costs that undermine competitiveness relative to American and Asian rivals. Orsini has led Confindustria since May 2024, according to his official biography, and has made industrial competitiveness a central theme of his tenure. His intervention in a major German-language newspaper signals an effort to build cross-border business support for a rollback of carbon pricing obligations.

Environmental groups warn ETS rollback would hurt energy crisis response Environmental non-governmental organizations warned that attacking the ETS would weaken the European Union's ability to respond to the energy crisis, according to reporting by ANSA. The NGOs framed the push by EU leaders and industry groups as a threat to the bloc's long-term energy security and climate commitments. Meanwhile, Przemysław Czarnek, Law and Justice vice president and a member of the Sejm, made the political case against the ETS during a visit to Katowice, claiming that holidays would be cheaper for Polish citizens if the system did not exist. Czarnek's remarks illustrate how the ETS has become a domestic political issue in Poland, where energy-intensive industry and coal-dependent regions are particularly sensitive to carbon pricing. The divergence between the positions of governing leaders — who seek reform rather than abolition — and opposition politicians and some business groups — who call for suspension — reflects the breadth of the debate now unfolding across the EU over the future of its flagship climate policy instrument. Carbon leakage concerns are expected to remain central to EU industrial policy discussions in the months ahead.