The European Commission recently proposed an update to the EU Emissions Trading System (ETS) benchmark values for the 2026–2030 period to determine future levels of free carbon allowances.

This regulatory update is mandatory under the ETS Directive, which requires a revision every five years to ensure the carbon market remains responsive to technological progress.

The new values are calculated based on the performance of the ten per cent most efficient installations in each industrial sector.

Adoption of these legal acts is expected by the end of June 2026, providing businesses with the necessary clarity to manage their carbon costs and avoid liquidity risks.

By publishing the draft early, the executive body ensures that operators understand the level of free allocation they will receive before the 2026 issuance deadline.

The system is designed to reward companies that invest in clean technology and decarbonisation while maintaining a level playing field for European industry against global competitors.

In a move to address industrial concerns, the commission is using legal flexibility to alter how indirect emissions from electricity use are handled for 14 specific product benchmarks.

By continuing to consider these indirect emissions in the benchmark setting, the commission expects to provide a financial benefit to industry worth approximately €4 billion over the next five years.

“The update ensures the system remains up to date and the proper functioning of the market,” stated representatives from the European Commission regarding the proposal.

“These benchmarks reward efficiency and provide incentives for industry to reduce emissions,” the executive body added in its technical briefing.

The commission also revealed plans for a more comprehensive modernisation of the ETS scheduled for July 2026, which will introduce sector-specific fallback benchmarks.

This future revision aims to provide more tailored decarbonisation pathways, particularly for processes like industrial heat at varying temperature levels.

Additionally, an ETS investment booster will be developed to facilitate access for small and medium sized enterprises to clean energy funding.

Data from 2021 and 2022 indicates that many plants are performing significantly better than previous benchmarks, driven by a combination of electrification, heat recovery, and sustainable biomass.

The commission clarified that the trend towards higher efficiency was not driven by a single technology, meaning the heat fallback benchmarks would have changed even without biomass contributions.

President Ursula von der Leyen, the President of the European Commission, recently noted that the system must remain flexible to changing market conditions while cutting dependence on fossil fuel imports.

The updated rules aim to deliver on climate commitments without compromising the energy security or strategic autonomy of the bloc.