Era of European industry free lunches needs to stop

Carbon Market Watch asserts that free allowances in the EU ETS have failed to drive decarbonisation, instead allowing heavy industry to generate profits while avoiding pollution costs. The organization criticizes the European Commission's revision proposal for extending free allocations and calls for a full phase-out by 2034 for CBAM sectors and a plan for all other sectors, insisting that any remaining subsidies be tied to proven investments in zero-carbon transformation and social safeguards.

• Free allowances in the EU ETS have resulted in significant financial windfalls for heavy industry without driving decarbonisation. Between 2008 and 2021, approximately €200 billion in EUAs were distributed for free, and in 2024 alone, nearly 500 million allowances with a market value exceeding €32 billion were handed out. Between 2013 and 2025, industrial installations received more free allowances than necessary to cover their emissions, allowing some companies to profit by up to €50 billion between 2008-2019.
• The document claims that the risk of 'carbon leakage'—companies moving production to countries with weaker climate laws—is unproven after 20 years of the EU ETS. It cites a 2023 study indicating that the steel sector is not strongly exposed to international competition and highlights that ArcelorMittal generated overallocation profits while having the worst CO2 intensity between 2005-2018.
• Profits from free allowances have been used for shareholder returns rather than green investments. ArcelorMittal returned over €10 billion to shareholders via buybacks from 2021-2025, and Europe's three largest petro-chemical companies bought back €86 billion in shares since 2022. Broadly, among the 300 largest listed non-financial corporations in Europe, dividends and buybacks rose from 27% to 68% of net profits between 2000 and 2024, while net investment fell from 18.9% to 7.4% of gross profit.
• The European Commission's revision proposal is criticized for extending free allocations for Carbon Border Adjustment Mechanism (CBAM) sectors to 2038, rather than the previously decided 2034 phase-out. According to Climact, this proposal could result in 3.3-3.8 billion free allowances between 2026-2040, potentially valued at over €300 billion if carbon prices exceed €100 per tonne in the 2030s.
• The Commission suggests new conditionalities starting in 2031, requiring installations to submit an 'Invest in EU and decarbonisation plan' to receive free allocations, with 20% of the allocation disbursed only upon confirmation of implemented investments. Carbon Market Watch argues this is insufficient, stating that 100% of allowances should be tied to proven investments and that eligibility should depend on compliance with labor, social, and environmental legislation.

APA

Wikström, E. (2026). Era of European industry free lunches needs to stop. Carbon Market Watch. https://carbonmarketwatch.org/2026/08/12/era-of-european-industry-free-lunches-needs-to-stop/

Chicago

Wikström, Emma. Era of European industry free lunches needs to stop. Carbon Market Watch, 2026. https://carbonmarketwatch.org/2026/08/12/era-of-european-industry-free-lunches-needs-to-stop/.

Wikipedia

{{cite press release |last1=Wikström |first1=Emma |title=Era of European industry free lunches needs to stop |publisher=Carbon Market Watch |date=12 August 2026 |url=https://carbonmarketwatch.org/2026/08/12/era-of-european-industry-free-lunches-needs-to-stop/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{wikstrm2026era, author = {Wikström, Emma}, title = {{Era of European industry free lunches needs to stop}}, publisher = {Carbon Market Watch}, year = {2026}, month = aug, url = {https://carbonmarketwatch.org/2026/08/12/era-of-european-industry-free-lunches-needs-to-stop/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }