The European Commission has finally released draft Emissions Trading System (ETS) benchmark values for 2026-2030 and opened them to public consultation until 8 June. The proposed benchmarks, initially scheduled for first-quarter adoption, are based on the emissions performance of the 10% best installations in 2021 and 2022, Kallanish notes.
For a significant number of installations this performance is significantly better than the previous benchmark levels, the Commission says. The benchmark reductions versus the previous period, 2021-2025, are determined within a defined range based on observed performance improvements across sectors.
Among the products used in the ferrous complex, the benchmark values (allowances/tonne) for 2026-2030 are 0.143 for coke, 0.086 for agglomerated iron ore and 1.248 for hot metal. This compares to 0.217, 0.157 and 1.288 respectively in the previous period. EAF carbon steel is at 0.142 and EAF high alloy steel at 0.176 versus 0.215 and 0.268 respectively previously.
One European blast furnace-based mill source tells Kallanish his firm had been hoping for higher benchmarks than those published, with the proposed values offering no relief for the steel industry.
The proposed regulation cites a 2024 delegated regulation that modified the hot metal benchmark by adding to the definitions of products covered the production of steel using direct reduction technology.
Production of steel under the hot metal benchmark using DRI is not to be considered when calculating the average greenhouse gas efficiency of the installations for the revised benchmark values for 2026-2030, the Commission draft document states.
The same regulation included hydrogen produced from water electrolysis in the hydrogen benchmark or ammonia benchmark. Those modifications should be considered when determining the revised benchmark values for the period from 2026 to 2030.
It was not possible to precisely determine emissions in product benchmark sub-installations, in particular those importing or exporting intermediate products whose production is covered by the system boundaries of another product benchmark. The greenhouse gas efficiencies of the concerned sub-installations should therefore not be considered when determining the revised benchmark values, the document notes. This concerns hot metal, among others.
The Commission will adopt the benchmarks by the end of June. The act is required to allocate free allowances to industry for 2026. This allocation is expected shortly after the act’s adoption.
ETS operators already know the amount of allowances they need to surrender by 30 September 2026 for their emissions from the previous year. “The publication of this Commission draft implementing act updating the EU ETS benchmark values will provide ETS operators with clarity on the amount of free allocation that will be allocated to them, thereby avoiding liquidity risks on the EU carbon market,” the Commission says.
Industry will, on average, continue to receive free allocation covering around 75% of its emissions. To incentivise industrial electrification, the updated approach maintains coverage of indirect emissions from electricity use across 14 product benchmarks. This leads to higher benchmark values with a financial impact of around €4 billion ($4.7 billion) for 2026-2030.
In response to concerns from industry, the Commission will also propose the introduction of sector-specific fallback benchmarks as part of its EU ETS revision scheduled to be announced in July.
