Key facts
- Portugal is urging the European Commission to reconsider its decision to reduce free polluting allowances for industry under the EU's carbon market.
- The move is feared to weaken companies' ability to invest in decarbonisation.
- Portugal's energy minister, Maria da Graça Carvalho, argues the review of free allocations for 2026-2030 comes at a difficult time for energy-intensive industries.
- Portugal proposes a temporary freeze on previous carbon allowance volumes until a wider ETS review on July 15.
- The European Ceramic Industry Association warned of potential additional costs of over €500 million in 2026 and €2.5 billion from 2026-30.
Portugal has urged the European Commission to pause cuts to free carbon allowances, warning that the move could damage industrial competitiveness and slow decarbonisation efforts. In a document seen by Euronews, Portugal's energy minister, Maria da Graça Carvalho, argued that the Commission's review of free allocations for the 2026–2030 period under the Emissions Trading System (ETS) comes at a particularly difficult time for Europe’s energy-intensive industries.
These industries are already struggling with high energy prices, production costs, and intense international competition. Portugal is proposing a temporary freeze on previous carbon allowance volumes until a wider ETS review scheduled for July 15 is completed. The government suggests that any freeze should be targeted by industry sector to ensure continued protection from excessive compliance costs.
Portugal's letter states that the ETS no longer reflects current global realities, with Europe effectively acting alone in imposing rising carbon costs on industries that already face structural disadvantages. The government advocates for a more gradual and realistic transition that aligns environmental objectives with economic and technological realities.
The ceramic, glass, and cement industries are highlighted as particularly vulnerable. The Portuguese government noted that many ceramic facilities are already relatively low-emission but remain heavily exposed to ETS carbon allowances. While acknowledging investments in efficiency and lower-carbon fuels, Portugal contends that viable alternatives like renewable gases and hydrogen are not yet sufficiently available or are prohibitively expensive.
The European Ceramic Industry Association (CERAME-UNIE) warned that the proposed changes could lead to an increase in carbon costs by over €500 million in 2026 compared to 2025, and total additional costs of €2.5 billion during 2026–30. The association also pointed to a recent sharp decline in the sector's activity across the EU, with production falling by approximately 30%, trade balance shrinking by more than 50%, and employment decreasing by 10%.
Lisbon argues that cutting carbon allowances could create a gap between industrial obligations and technological realities, potentially increasing compliance costs, reducing firms' capacity to fund decarbonisation investments, and incentivising production relocation outside the EU (carbon leakage). The revision of free allowances shortly before a broader ETS review also introduces unnecessary regulatory uncertainty.
Meanwhile, a coalition of 33 heavy-industry players from the chemicals, steel, and metals sectors has also urged EU leaders to halt what they describe as a "dangerous escalation in carbon costs," warning that the ETS is becoming a threat to competitiveness rather than a driver of industrial transformation.