Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC as regards revised benchmark values for the heat and fuel benchmarks for the period from 2026 to 2030
Date: 2026-07-17
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU emission allowance, EU environmental policy, allocation of resources, greenhouse gas, industrial policy, reduction of gas emissions, tradeable emission permit

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   EUROPEAN COMMISSION  Brussels, 17.7.2026  COM(2026) 619 final 2026/0211 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC as regards revised benchmark values for the heat and fuel benchmarks for the period from 2026 to 2030 {SEC(2026) 616 final} - {SWD(2026) 616 final} - {SWD(2026) 617 final} - {SWD(2026) 618 final} (Text with EEA relevance)  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

In  recital  (16)  of  Commission  Implementing  Regulation  (EU)  2026/1412  of  26  June  2026 
determining  revised  benchmark  values  for  free  allocation  of  emission  allowances  for  the 
period from  2026 to  20301 , the Commission  committed  to  propose, at  the same time as its 
proposal to revise the ETS Directive, a stand-alone proposal solely to increase free allocation 
levels determined by the heat and fuel benchmarks (‘fallback benchmarks’) up to 2030, while 
ensuring the increase does not trigger the application of the cross-sectoral correction factor. 

• 

Consistency  with  existing  policy  provisions  in  the  policy  area  and  with  other 
Union policies 

All  sectors  of  the  economy  should  contribute to  the  reduction  of  greenhouse  gas  emissions. 
The  present  proposal  relates  to  free  allocation  determined  by  the  heat  and  fuel  benchmarks 
until  2030  and  aims  at  enhancing  (without  triggering  the  application  of  the  cross-sectoral 
correction  factor)  protection  from  carbon  leakage  through  an  increase  of  the  corresponding 
free allocation levels for the period from 2026 to 2030. 

The  changes  introduced  will  be  reflected  in  a  Commission  Implementing  Regulation 
amending  the  Commission  Implementing  Regulation  on  revised  benchmark  values  for  free 
allocation  of  emission  allowances,  as  well  as  a  Commission  Decision  amending  the 
preliminary amounts of free allocation determined for the period from 2026-2030. 

This proposal is solely on allocation levels determined by the heat and fuel benchmarks up to 
2030, and all other issues are addressed in the broader proposal to amend the ETS Directive2, 
including  rules  for  benchmark  values  for  the  periods  from  2031.  The  Explanatory 
Memorandum to that proposal and its Impact Assessment3 explain the wider context. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal base is the same (Article 192(1) of the Treaty on the Functioning of the European 
Union)  as  for  the  main  ETS  proposal,  COM(2026)  616,  as  it  addresses  one  element  of  the 
overall revision.  

• 

Subsidiarity (for non-exclusive competence)  

Free  allocation  is  harmonised  in  the  EU  ETS  and  administered  at  national  level  under 
harmonised Union-wide rules. 

• 

Proportionality 

This proposal increases certain free allocation levels determined by the fallback benchmarks 
until 2030. It does not go beyond what is necessary to ensure timely and effective support to 
the  sectors  concerned  and  is  designed  in  order  not  to  trigger  the  application  of  the  cross-

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2 
3 

Commission  Implementing  Regulation  (EU)  2026/1412  of  26  June  2026  determining  revised 
benchmark values for free allocation of emission allowances for the period from 2026 to 2030 pursuant 
to Article 10a(2) of Directive 2003/87/EC of the European Parliament and of the Council, C/2026/4372 
(OJ L, 2026/1412, 29.6.2026, ELI: http://data.europa.eu/eli/reg_impl/2026/1412/oj).  
COM(2026) 616. 
SWD(2026) 616. 

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sectoral  correction  factor,  thereby  avoiding  negative  redistribution  effects  on  free  allocation 
determined on the basis of the product benchmarks.  

• 

Choice of the instrument  

The objectives  of this  proposal  can be best  achieved  pursuant  through a  Regulation.  This  is 
the most appropriate legal instrument to introduce amendments to the existing ETS Directive 
as  regards  rules  concerning  the  update  of  the  benchmark  values  since  those  do  not  require 
transposition  by  Member  States.  In  addition,  the  update  of  the  benchmark  values  is 
implemented  directly  by  the  Commission  in  accordance  with  the  empowerment  in  Article 
10a(2), third subparagraph of the ETS Directive. 

3. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

• 
The Explanatory Memorandum to the proposal to amend the ETS Directive4, and its Impact 
Assessment5 explain the wider context, including ex post evaluation and fitness check of the 
ETS Directive. 

• 

Stakeholder consultations 

The Commission consulted the expert group on free allocation on the benchmark values for 
the period 2026-2030 in different stages of the process leading up to their determination, with 
preliminary results presented on 5 November 2025, 15 December 2025 and 21 January 2026.  

The update of ETS benchmark values for 2026-2030 has been published for public feedback 
between 11 May until 8 June 2026 and received more than 400 replies. More than 50% of the 
feedback  came  from  companies  and  38%  from  business  association.  Overall,  most  of  the 
feedback  concerned  the  fallback  benchmarks  update  and  asked  to  establish  sector-specific 
fall-back  benchmarks.  Some  respondents  asked  to  freeze  the  benchmarks  and  more 
transparency.  More  positive  comments  welcomed  the  inclusion  of  indirect  emissions  in 
benchmarks  previously  subject  to  exchangeability  and  urged  for  a  swift  adoption  of  the 
regulation for clarity. Finally, proposals for the introduction of a different methodology were 
submitted but none that could be implemented within the existing legal framework set by the 
ETS Directive. 

On 3 June, two expert group meetings were held, one with the Member States, and one with 
Member States and industry representatives on the update of ETS benchmark values for the 
years 2026-2030. The option for sector-specific fallbacks was presented to Member States and 
highlighted as  generating  insufficient  increase to  free allocation levels  until  2030 calculated 
on the basis of fallback benchmarks for sectors at higher risk of carbon leakage due to limited 
availability  of  abatement  techniques  and  measures.  This  proposal    therefore  includes  an 
adjustment to the maximum update rate for fallback benchmark ensuring the highest possible 
increase  of  free  allocation  determined  on  the  basis  of  the  fallback  benchmarks  until  2030, 
without  triggering  the  application  of  the  cross-sectoral  correction  factor,  as  committed  in 
recital  (16)  to  Implementing  Regulation  2026/1412  and  voted  by  the  Climate  Change 
Committee on the 15th of June 2026. 

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COM(2026) 616. 
SWD(2026) 616. 

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• 

Impact assessment 

A  single  overall  impact  assessment  accompanies  both  this  proposal  and  the  parallel 
Commission  proposal  to  revise  the  ETS  Directive  and  was  submitted  to  the  Regulatory 
Scrutiny Board (RSB) on 23 March 2026. The Explanatory Memorandum to the proposal to 
revise  the  ETS  Directive  explains  the  wider  context.    The  impact  assessment  includes  the 
consistency  check  of  Article  6(4)  of  the  European  Climate  Law,  which  requires  the 
Commission  to  assess  the  consistency  of  any  EU  draft  measure  or  legislative  proposal  with 
the Climate Law’s objectives, such as the EU’s climate-neutrality objective. 

In Annex 12 to the Impact Assessment, an improved current approach on free allocation has 
been  assessed.  As  regards  benchmarks,  policy  option  ‘CL1’  in  that  Annex  provided  for  the 
following  approach:  Benchmarks  will  continue  to  be  set  by  the  average  performance  of  the 
10%  best  performing  installations,  taking  into  account  the  minimum  and  maximum  update 
rates  and  the  rules  for  extrapolation  of  the  trend  to  the  mid-point  of  the  relevant  five-year 
allocation period. However, to address the main concerns raised by industry stakeholders and 
Member States during the various stages of consultation of the recently adopted Benchmark 
Regulation, fallback benchmarks should be differentiated to take into account the specificities 
and emission reduction potential of the different sectors. 

The proposal differs from the policy option included in the impact assessment as regards the 
fallback benchmarks. The sector-specific approach included in the impact assessment  would 
deliver  an  increase  to  free  allocation  to  a  limited  number  of  sectors  only,  as  the  same 
maximum update rate would still apply. Discussions with Member States and stakeholders in 
the  Climate  Change  Expert  Group  (CCEG)  on  free  allocation  issues  on  3  June  2026 
confirmed  that  the  corresponding  overall  increase  to  free  allocation  levels  until  2030  was 
insufficient to address the higher vulnerability to carbon leakage of certain sectors where the 
fallback  benchmarks  apply  and  in  which  limited  abatement  techniques  and  measures  are 
available. Instead, the present proposal ensures the highest possible increase to free allocation 
levels  determined  on  the  basis  of  fall-back  benchmarks  for  the  2026-2030  period,  without 
triggering the application of the cross-sectoral correction factor pursuant to Article 10a(5) of 
the ETS Directive.  

• 

Regulatory fitness and simplification 

Limited  administrative  burden  will  result  from  this  proposal.  The  proposal  relies  solely  on 
existing  processes,  involving  both  national  competent  authorities  and  the  Commission, 
towards establishing the level of free allocation to be allocated each year to installations in the 
EU ETS in accordance with Article 11 of the ETS Directive. It implies a follow up revision of 
Commission Delegated Regulation (EU) 2019/331 of 19 December 20186. The amendments 
do  not  require  transposition  in  national  laws.  Finally,  no  additional  data  collection  exercise 
will be needed since the relevant dataset is already available. Indeed, pursuant to point (c) in 
the third subparagraph of Article 10a(2) of the ETS Directive, the information submitted by 
Member  States  for  the  years  2021  and  2022  in  the  list  referred  to  in  Article  11  of  the  ETS 
Directive is to be used as reference for the update of the benchmark values for the period from 
2026 to 2030. 

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Commission  Delegated  Regulation  (EU)  2019/331  of  19  December  2018  determining  transitional 
Union-wide  rules  for  harmonised  free  allocation  of  emission  allowances  pursuant  to  Article  10a  of 
Directive 2003/87/EC of the European Parliament and of the Council (OJ L 59, 27.2.2019, pp. 8–69). 

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4. 

BUDGETARY IMPLICATIONS 

The proposal relies on existing processes, involving both national competent authorities and 
the Commission, towards establishing the level of free allocation to be allocated each year to 
installations  in  the  EU  ETS  in  accordance  with  Article  11  of  the  ETS  Directive.  For  the 
implementation of the proposal, no additional data is collected and no additional human and 
administrative resources are required. The additional free allocation to be granted under this 
proposal  does  not  impact  the  budget,  given  that  the  financial  value  of  the  allowances  to  be 
used  is  not  attributed  to  the  budget  of  the  European  Commission.  Therefore,  no  additional 
budgetary implication is induced by the present proposal.  

The proposal does not meet the criteria that would trigger digital relevance. It does not impose 
binding  requirements  concerning  a  digital  public  service  with  implications  for  cross-border 
interoperability,  and  does  not  affect  the  design,  development,  or  implementation  of  digital 
public  services  or  the  networks  and  information  systems  supporting  them.  Neither  does  it 
require  the  establishment  of  IT  systems  or  digital  infrastructure  co-owned  by  the  European 
Commission  and  Member  States.  Furthermore,  the  proposal  does  not  introduce  monitoring, 
reporting,  or  other  business-agnostic  processes  that  are  likely  to  be  automated  or  digitally 
implemented. 

Given  the  absence  of  both  financial  implications  and  digital  relevance,  an  accompanying 
Legislative Financial and Digital Statement (LFDS) is not necessary for this proposal.  

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting  

The  Commission  will  continue  to  monitor  and  evaluate  the  functioning  of  the  ETS  in  its 
annual  Carbon Market  Report, as foreseen under  Article 10(5) of the ETS  Directive.  It will 
cover the impacts of the current revision of the ETS. The Carbon Market Report relies on the 
analysis of the evaluation of progress on the application of the ETS Directive that is regulated 
in Article 21 of the ETS Directive, which requires Member States to report to the Commission 
on  issues  including  the  allocation  of  allowances,  operation  of  the  Registry,  application  of 
monitoring  and  reporting,  verification  and  accreditation  and  issues  relating  to  compliance. 
The annual Carbon Market Report and Member States reporting also apply to the sectors to 
which  emissions  trading  is  extended.  The  MRV  data  obtained  through  the  regulation  of  the 
new sectors will be a key source for information for the Commission to evaluate progress in 
the sectors concerned.  

The integrated governance and monitoring process  under the Regulation on the Governance 
of  the  Energy  Union  and  Climate  action  is  also  expected  to  make  sure  that  climate  and 
energy-related actions at European, as well as regional, national and local level, including the 
ETS, contribute to the EU climate neutrality  and Energy Union's objectives. Several market 
analysts  closely  follow  various  aspects  of  the  carbon  market  and  its  functioning,  and  the 
Commission will continue to monitor this work.  

Through  regular  contacts  with  stakeholders,  the  Commission  is  alert  to  their  views  and 
concerns about the functioning of the ETS. ETS-related matters are discussed in a dedicated 
forum,  the  Climate  Change  Expert  Group  (CCEG)  which  brings  together  Member  States 
competent authorities, stakeholders (industry associations and NGOs) and the Commission. In 
its different formations, the CCEG discusses, among other aspects, the implementation of free 
allocation, auctioning and issues related to the functioning of the Union Registry. Update to 
the  rules  on  benchmarks  have  been  and  will  keep  being  presented  and  discussed  in  the 

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formation of the CCEG dedicated to free allocation. In addition, the ETS Compliance Forum 
provides  the  competent  authorities  of  all  ETS  countries  (the  27  Member  States,  Norway, 
Iceland and Liechtenstein) with a platform for sharing information, learning and experience, 
leading to effective implementation of the ETS. The forum executes targeted events, such as 
the Compliance Forum Conference, organized annually and aimed at sharing experiences and 
facilitating  dialogue  amongst  Member  States  competent  authorities,  as  well  as  task  forces 
dedicated to  specific topics and training events.  National  Accreditation  Bodies and verifiers 
are  sometimes  invited  to  participate  to  the  activities  of  the  ETS  Compliance  Forum,  where 
relevant.  

• 

Detailed explanation of the specific provisions of the proposal 

This proposal amends Article 10a as concern the determination of the revised values for the 
heat and fuel benchmarks until 2030. The main changes introduced are the following:  

The proposal provides for the adjustment to the maximum annual update rate to be applied to 
heat and fuel benchmarks for the update by the Commission of those benchmark values until 
2030.  In  that  case,  the  adjusted  percentage  rate  value  to  be  applied  will  reflect  the  highest 
possible  upwards  adjustment  to  free  allocation  levels  determined  by  the  heat  and  fuel 
benchmarks  by  fully  using  the  available  allowances  that  can  be  allocated  free  of  charge  for 
2026  to  2030,  amounting  to  around  80  million  allowances,  while  at  the  same  time  not 
triggering  the  application  of  the  cross-sectoral  correction  factor.  The  minimum  update  rate 
remains  unchanged.  The  reference  periods,  datasets  and  overall  methodology  to  update  the 
benchmark values remain unchanged. The benchmark values will be adjusted for the period 
from  2027  to  2030.  The  adjustment  to  free  allocation  levels  for  the  year  2026  will  be 
implemented  through    an  update  of  the  benchmark  values  for  the  year  2027  applying  a 
maximum  update  percentage  rate  value  that  makes  use  of  40  %  of  the  additional  amount 
referred to in Article 10a(5a) and ensures that no reduction pursuant to Article 10a(5) applies. 

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2026/0211 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2003/87/EC as regards revised benchmark values for the heat and 
fuel benchmarks for the period from 2026 to 2030 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 192(1) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1,  
Having regard to the opinion of the Committee of the Regions2,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

Free  allocation  to  installations  in  the  system  for  greenhouse  gas  emission  allowance 
trading  within  the  Union  (EU  ETS)  is  determined  based  on  harmonised  Union-wide 
benchmarks reflecting the performance of the most efficient installations. The ex-ante 
Union-wide  benchmarks  are  established  in  Annex  I  to  Commission  Delegated 
Regulation (EU) 2019/3313. The Commission updates the benchmark values for each 
five-year period for free allocation referred to in Article 11 of Directive 2003/87/EC in 
accordance with the rules laid down in Article 10a of that Directive. 

To address concerns expressed by certain industrial sectors in the context of updating 
the benchmark values until 2030 and provide additional protection against the risk of 
carbon leakage, the quantity of allowances to be allocated for free for the period from 
2026  to  2030,  determined  by  the  heat  and  fuel  benchmarks  (‘fallback  benchmarks’), 
should be increased. In order to do so, it is appropriate to adjust the maximum annual 
update rate applied for the fallback benchmarks by using the totality of the allowances 
available  for  free  allocation  in  the  period  from  2026  to  2030  as  laid  down  in 
Commission  Decision  XXX4  [CSCF  Decision],  amounting  to  around  80  million 
allowances. In line with the targeted nature of this adjustment and the rules set out in 
in  Commission  Delegated  Regulation  (EU)  2019/331  on  the  determination  of  the 

1 
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OJ C , , p. . 
OJ C , , p. . 
Commission  Delegated  Regulation  (EU)  2019/331  of  19  December  2018  determining  transitional 
Union-wide  rules  for  harmonised  free  allocation  of  emission  allowances  pursuant  to  Article  10a  of 
Directive 2003/87/EC of the European Parliament and of the Council (OJ L 59, 27.2.2019, p. 8, ELI: 
http://data.europa.eu/eli/reg_del/2019/331/oj). 
[please insert the full reference once available – CSCF Decision] 

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(3) 

(4) 

(5) 

(6) 

(7) 

annual  amount  of  allowances  allocated  for  free  to  installations,  the  additional  free 
allocation resulting from the adjustment should only concern the amounts determined 
by the fallback benchmarks.  

To  avoid  unnecessary  administrative  burden  for  operators  and  public  authorities 
related to the adjustments of free allocation decisions and the transfer of allowances to 
operators’  accounts,  the  benchmark  values  should  be  adjusted  for  the  period  from 
2027 to 2030, while the additional free allocation amounts for the year 2026 should be 
made available together with the free allocation for the year 2027. To ensure sufficient 
time  is  provided  for  to  reflect  this  adjustment  in  the  context  of  Regulation  (EU) 
2023/956 of the European Parliament and of the Council5, the resulting adjustment to 
free  allocation  levels  for  the  year  2026  should  be  implemented  through  the 
corresponding update of the benchmark values for the year 2027. 

To  preserve  the  level  playing  field  and  prevent  negative  effects  on  free  allocation 
determined on the basis of the product benchmarks, it is necessary to ensure that the 
adjusted percentage rate value for the maximum annual update rate used to determine 
the  fallback  benchmarks  until  2030  does  not  trigger  the  application  of  the  cross-
sectoral correction factor pursuant to Article 10a(5) of Directive 2003/87/EC.  

To  further  incentivise  decarbonisation,  it  is  appropriate  for  the  existing  maximum 
update  rate  for  fallback  benchmarks  established  under  Article  10a(2),  third 
subparagraph, point (d), of Directive 2003/87/EC for the period from 2026 to 2030 to 
continue to be applicable to installations carrying out oil and gas activities, including 
as  regards  the  free  allocation  amounts  determined  on  the  basis  of  the  fallback 
benchmarks.  To further operationalise the differentiated treatment between oil and gas 
activities and other activities the fallback benchmarks are applied to, the Commission 
should  establish  the  corresponding  sector  specific  sub-benchmarks  under  the  ex-ante 
heat and fuel benchmarks for activities covered by NACE codes 0610, 0620, 1920 and 
4950 set out in Annex I to Regulation (EC) No 1893/2006 of the European Parliament 
and the Council6. 

Directive 2003/87/EC should therefore be amended accordingly.  

To  ensure  a  swift  increase  of  free  allocation  levels  determined  on  the  basis  of  the 
fallback benchmarks that reflect the revised maximum annual update rate value, and to 
ensure that those additional amounts are made available as of the determination of free 
allocation  for  the  year  2027,  this  Regulation  should  solely  address  allocations  under 
those benchmarks  within the amount of allowances available  and  enter into  force  on 
the third day following that of its publication, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Amendments to Directive 2003/87/EC 

Directive 2003/87/EC is amended as follows: 

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Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing 
a carbon border adjustment mechanism (OJ L 130, 16.5.2023, pp. 52–104). 
Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006 
establishing the statistical classification of economic activities NACE Revision 2 and amending Council 
Regulation (EEC) No 3037/90 as well as certain EC Regulations on specific statistical domains (OJ L 
393, 30.12.2006, p. 1, ELI: http://data.europa.eu/eli/reg/2006/1893/oj). 

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(1) 

in Article 10a, the following paragraphs 2a and 2b are inserted after paragraph 2:  

‘2a.  By  way  of  derogation  from  paragraph  2,  third  subparagraph,  point  (d),  of  this 
Article,  the  maximum  annual  reduction  rate  to  be  applied  for  the  update  of  the 
benchmark  values  for  heat  and  fuel  benchmarks  for  the  period  from  2027  to  2030 
shall  be  reduced  to  a  percentage  rate  value  that  makes  full  use  of  the  additional 
amount  referred  to  in  Article  10a(5a)  and  ensures  that  no  reduction  pursuant  to 
Article 10a(5) applies.  

Concerning the update of the benchmark values for heat and fuel benchmarks for the 
year  2027,  the  maximum  annual  reduction  rate  to  be  applied  shall  be  reduced  to  a 
percentage rate value that makes use of 40 % of the  adjustment pursuant to the first 
subparagraph and ensures that no reduction pursuant to Article 10a(5) applies. 

2b.  Paragraph  2a  shall  not  apply  to  free  allocations  for  installations  carrying  out 
economic activities covered by NACE codes 0610, 0620, 1920 and 4950  set  out  in 
Annex  I  to  Regulation  (EC)  No  1893/2006  of  the  European  Parliament  and  the 
Council*. 

______ 

* Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 
20  December  2006  establishing  the  statistical  classification  of  economic  activities 
NACE Revision 2 and amending Council Regulation (EEC) No 3037/90  as well as 
certain  EC  Regulations on specific statistical  domains (OJ L 393, 30.12.2006, p. 1, 
ELI: http://data.europa.eu/eli/reg/2006/1893/oj).’ 

This Regulation shall enter into force on the third day following that of its publication in the 
Official Journal of the European Union. 

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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