EU Council Agrees Targeted ETS Measure to Shield Energy-Intensive Industries from Carbon Leakage

The EU Council has agreed on a targeted measure under the Emissions Trading System to protect energy-intensive sectors from carbon leakage. This move comes as the EU integrates the Carbon Border Adjustment Mechanism (CBAM) and recalibrates free allowances to avoid pushing emissions abroad. The measure is designed to balance industrial competitiveness with the bloc's decarbonization goals, though the specific thresholds and sector definitions will determine its practical impact. For market participants, this affects the supply of EU allowances and the compliance costs for heavy industry. The timing of the phase-in and how it interacts with CBAM will be key. If free allowances remain too generous, the carbon price signal weakens. If they are too tight, industries may still relocate. The Council's press release suggests a targeted approach, but the details matter for anyone trading or planning around EU carbon pricing.