Brussels Climate Puzzle: Will Free CO₂ Permits Continue? 8 Options
EU leaders are debating 8 pathways that will determine if Free CO₂ Permits continue. See how each option could reshape carbon pricing and industrial strategy.
Europe’s carbon market is entering a hard political season. Brussels has confirmed that no final call is made yet on free CO₂ permits, even after reports that industry relief could be extended. The review is tied to the EU’s 2040 climate path, so this is not a technical tweak. It is a competitiveness fight, a climate fight, and a trade fight at the same time.
What Is On The Table Right Now
Policy discussion now circles around eight realistic routes: keep the current 2034 end-date for free permits; slow the phase-out from 2028; extend free allocation beyond 2034; stretch ETS auctioning beyond 2039; change how fast the annual cap declines; expand CBAM to more downstream goods. Keep or widen small-importer exemptions; and add stronger anti-circumvention/default-emissions rules for imports. None is final, but each is active in Brussels and linked to the bigger 2040 target debate.
Why Industry Pressure Is Growing
CBAM started its definitive phase on 1 January 2026, and the Commission says implementation was smooth in week one. At the same time, heavy industry says carbon costs are biting now, not later, and some governments want a softer landing. Czech leaders are pushing ETS reform, while major manufacturers warn of steep compliance bills by decade-end. Official policy post: European Parliament Environment Committee on X.
What To Watch Before Summer
Watch the Commission’s ETS/CBAM package expected in July, then expect intense bargaining with member states and Parliament. If Brussels prolongs free permits without tightening other levers, emissions cuts could slow.
If it keeps the current phase-out, industrial decarbonization pressure rises fast. Either way, 2026 looks like the year Europe rewrites the carbon-competitiveness balance.
FAQs
Q1) Has Brussels decided to keep free CO₂ permits permanently?
Not yet; Brussels says decisions wait for the 2026 ETS review and political negotiations first.
Q2) When do current free permits phase out under existing rules?
Current rules phase out free allocation in CBAM sectors gradually from 2026 to 2034 inclusive.
Q3) Why does CBAM matter in this permits debate?
CBAM charges import emissions, aiming to prevent carbon leakage and match EU producer carbon costs.
Q4) Why are some governments asking for ETS changes now?
Because energy-intensive firms claim high permit prices hurt competitiveness and investment versus non-EU competitors today.
Q5) What is the next concrete policy milestone to watch?
Expect a Commission package in July 2026, then Parliament and member states will negotiate details.
