When EU Insider covered the run-up to Europe's carbon-market overhaul in mid-July, the fight was still open: industry wanted relief, a bloc of northern capitals wanted the carbon price defended, and a €24 billion revenue pot was up for grabs. The Commission put its cards on the table on 17 July 2026, and nearly a month on the shape of the deal is clear. Industry got the bigger share of what it asked for.
The proposal prolongs the free pollution allowances that shield energy-intensive producers — steel, cement, chemicals — well past 2030 and into the 2040s, rather than phasing them out on the old timetable. It adds an immediate top-up worth around €6 billion for 2026-2030 through revised benchmarks, and on average free allowances will now cover roughly 75% of the industrial sector's emissions. Presented alongside a new Electrification Action Plan, the package is, in the Commission's telling, about keeping heavy industry in Europe long enough to decarbonise it rather than watching it leave.
The relief is not unconditional. From 2031, free allocation becomes tied to delivery: operators must submit a verified decarbonisation investment plan, with 80% of allowances released once the plan is approved and the final 20% contingent on actually cutting emissions by the end of each five-year period. To help pay for that transition, the proposal sets up a €100 billion Industrial Decarbonisation Bank, whose first phase — an "Investment Booster" of 400 million allowances, worth roughly €30 billion — is due to start in 2028.
Read against the July battle lines, the proposal is a clear tilt toward the relief camp led by Italy and Poland. Sweden's and Finland's prime ministers had written to Commission President Ursula von der Leyen urging her to defend "the carbon price trajectory" as "indispensable" to mobilising climate investment, warning that European industries had "invested billions on the basis of a solid policy framework." The compromise sketched earlier by Germany's Öko-Institut and the employer-aligned IW — slower free-allowance cuts now, a longer overall glide path — is close to what emerged. The price signal survives; its bite on heavy industry has been pushed a decade down the road.
The ETS review was always industrial policy conducted through a carbon price, and the 17 July text confirms which instinct won: protect the industrial base first, tighten the screws later and conditionally. That is defensible if the conditionality holds — if the decarbonisation plans required from 2031 are enforced rather than waved through, and if the €100 billion bank actually moves money into cleaner steel and cement. It is a poor bargain if 2031 becomes the next deadline to be softened. Co-decision with Parliament and Council now runs into 2027, which means the real test is not what the Commission proposed this summer but whether the conditions attached to Europe's biggest climate lever are still standing when the negotiating is done.
