Ten EU Leaders Call for Urgent ETS Reform to Protect Strategic Industrial Sectors

Ten European Union leaders, including Italian Prime Minister Giorgia Meloni and Polish Prime Minister Donald Tusk, signed a joint non-paper calling on the European Commission to review the EU Emissions Trading System directive and extend free carbon allowances for strategic industrial sectors beyond the current 2034 deadline. The initiative was promoted by the Czech Republic and co-signed by leaders from Bulgaria, Croatia, Greece, Poland, Romania, Slovakia, Slovenia, Hungary, and Belgium. The document, described as being in support of the steel sector, asks the European Commission to consider maintaining free allowances as a mechanism to defend European industrial competitiveness. The signatories argue the measure is necessary to prevent carbon leakage — the relocation of energy-intensive industries to countries with less stringent environmental rules.

Six industrial sectors targeted for continued exemptions The non-paper specifically identifies steel, aluminum, cement, lime, chemicals, and refining as sectors that should benefit from continued free allowances after 2034. The document requests "a balancing mechanism with free quotas" to shield these industries from indirect carbon costs arising from rising electricity prices. The signatories attached a condition to their request, stating that the continuation of free allowances should only be considered alongside a comprehensive and effective protection mechanism against carbon leakage. The document also calls for due account to be taken of the implementation of the Carbon Border Adjustment Mechanism to ensure a level playing field for exported goods. The signatories stated that a phase-out of free allowances should only proceed where suitable and economically viable alternatives exist. Among the signatories, Nicușor Dan, President of Romania since 2025, and Hungarian Prime Minister Viktor Orbán also added their names to the initiative, according to reporting by Ziare.com.

The EU Emissions Trading System has been the cornerstone of European climate policy since its launch in 2005. Under current rules, free carbon allowances for most industrial sectors are scheduled to be phased out by 2034, with companies required to purchase all permits on the open market thereafter. The CBAM, introduced as a complementary instrument, is designed to prevent carbon leakage by pricing imports from countries without equivalent carbon costs. The ETS has undergone several major reforms over the years, with the most recent overhaul tightening the cap on emissions and accelerating the phase-out of free allowances as part of the EU's Fit for 55 climate package.

Tusk backs free permits as Morawiecki says he was ignored for years Polish Prime Minister Donald Tusk pressed the EU to keep giving industry free carbon permits, according to Reuters, lending the weight of one of the bloc's larger economies to the push for reform. Former Polish Prime Minister Mateusz Morawiecki, who led the country from 2017 to 2023, commented on the development by stating that for many years he had raised warnings that others did not want to hear, according to reporting by Niezalezna.pl. Radio Gdańsk reported that analysts warned Poland in particular would feel the negative consequences of changes to the ETS structure. The convergence of current and former Polish government figures on this issue reflects the sensitivity of carbon pricing for Poland's heavily industrial economy. The Czech Republic, as the promoter of the non-paper, has positioned itself at the center of a growing coalition of central and eastern European governments seeking to reshape the EU's industrial climate policy.

Dutch prime minister and environmental groups push back against the proposal The Prime Minister of the Netherlands defended the existing ETS framework, arguing that without it, the EU would currently be importing millions more tons of fossil fuels, according to Polish outlet wnp.pl. Environmental organizations also criticized the proposal, claiming that weakening the ETS would undermine the EU's response to the energy crisis, according to ANSA. The tension between the two camps reflects a broader divide within the EU between member states with large heavy-industry bases and those more committed to accelerating the green transition. Proponents of the review frame the issue as one of industrial survival and economic competitiveness, while critics argue that diluting the carbon market sends the wrong signal at a critical moment for European climate ambitions. The European Commission has not yet formally responded to the non-paper, and no timeline for a review of the ETS directive has been confirmed in the available reporting.