National experts cleared the 2026–2030 benchmark implementing act on 15 June, and the most consequential number in it is not a benchmark value but the roughly €4 billion in additional free allocation the Commission conceded to carry the room. The value comes from extending coverage of indirect, electricity-related emissions across fourteen product benchmarks that previously rewarded only direct emissions. That lifts the benchmark values and keeps industry, on average, holding free allowances against about three-quarters of its emissions through 2030. The market had already discounted it before the committee met.
How the room was won
The five-yearly benchmark refresh is housekeeping under Article 10a of the Directive. It turned political after February’s industrial summit, when the proposed cut to fallback benchmarks became a competitiveness flashpoint for energy-intensive sectors without product-specific benchmarks. The Commission bought its majority twice. It offered the indirect-emissions extension now, and it promised to legislate sector-specific fallback benchmarks inside the 15 July revision, defusing the original grievance rather than settling it in the implementing act. A bloc led by Italy and Poland, joined by Latvia, Lithuania and Malta, still voted against; Bulgaria, Hungary, Romania, Slovenia and Cyprus abstained. The compromise landed at the shallow end of the legislated decline range.
Formal adoption by the Commission is due before month-end. National authorities then reprogram their allocation formulas, and the bulk of 2026 allowances should reach EUTL accounts in late August or early September. That timing matters: it coincides with the September surrender deadline for 2025 compliance, where the surrender rate sat near a quarter of obligations in mid-June.
What the tape said
Price action tells the cleaner story. EUAs pushed above €90 early in the year, with the January peak near €93 as speculative length built on forecasts of triple-digit carbon. A reversal of roughly €30 followed into mid-March, as doubts over the scale of future ambition and the Middle East shock prompted funds to unwind record long positions. Prices have been rangebound since, hovering in the high €70s and nudging €80 around the benchmark vote on the back of US–Iran de-escalation, prolonged French nuclear outages and warm weather lifting power fundamentals.
The read here is that 15 June carried political information, not quantitative information. The numbers were leaked and modelled well in advance, so the relief in the tape reflects one thing: the risk that capitals would force a broader dilution of the 2026–2030 values has been taken off the board for now.
The questions the benchmarks left untouched
The structural variables sit in the 1 April MSR proposal and the 15 July package, not in the act just passed. On the reserve, the Commission wants to stop invalidating allowances above the 400-million threshold from 2031. Recall that 270 million were invalidated on 1 January, bringing the reserve down to 400 million, yet the system still closed 2025 carrying a surplus on the order of two billion allowances even as stationary emissions fell 1.3%.
The cap trajectory is the genuine live wire. The current linear reduction factor of 4.4% drives the cap toward zero around 2039–40, and several capitals want that softened. Rapporteur Peter Liese has floated 3.4%; Paris wants the line smoothed so allowances run to 2050 rather than 2040; Warsaw has argued for annual cuts easing toward 2–3%. The Commission has separately floated letting carbon removals, and possibly international credits, into the system under the language of “raising the cap.” DG CLIMA’s director-general Kurt Vandenberghe previewed the full proposal a month early in June, telling stakeholders, “We have no more secrets.” The 15 July text is expected to align the cap with the 90%-by-2040 target now in the Official Journal, allow credits to cover up to 5% of that goal, rechannel revenue through an Industrial Decarbonisation Bank alongside the Innovation Fund, and reopen the scope question for waste, maritime and aviation. Co-decision is targeted to wrap by Q1 2027, with implementation from 2028.
On our reading, the benchmark battle was a proxy fight. It let member states bank a visible competitiveness win at modest cost to system supply, while the Commission preserved its headline ambition intact for the harder argument in July.
What comes next for the price and the compliance desk
The current design delivers an emissions cut of 89% to 93% by 2040; any single loosening, whether ending invalidation, cutting the LRF to 3.4%, or admitting 3% of offsets, is individually survivable, but combining them flips a structural deficit into surplus and hollows out the price signal. The political economy of the review points toward exactly that stacking, because every capital arrives with its own carve-out. The non-obvious conclusion follows: the asymmetric risk to the back of the curve is to the downside, even though the consensus long thesis that carries EUAs toward €140–145 by 2030 rests on continued tightening. The variable to watch is not whether the 4.4% LRF headline survives, but whether the already-tabled no-invalidation MSR combines with a softer LRF and removals. That trio, not any single leg, is what reprices 2030 through 2035.
Near-term catalysts cluster in a tight window. The UK–EU reset summit, tentatively set for 13 July, could confirm ETS linkage two days before the review lands. Mutual exemption from each side’s carbon border mechanism alone would strip out an estimated £800 million in UK cost, and the EUA–UKA spread is expected to compress below €10 by year-end. A quieter wrinkle deserves attention: the UK intends to adopt EU benchmark values for 2028–2030, which means the implementing act Brussels finalises this month becomes, in effect, future UK industrial policy. The benchmark file is more extraterritorial than its housekeeping label implies.
For compliance buyers, allocation timing and the September surrender create a mechanical demand pull into the third quarter, while ETS2’s 2028 start and the continued CBAM phase-in keep the structural demand story intact regardless of how the cap debate resolves. The price risk this summer is two-sided and event-driven. Hedging that references the discrete July dates, rather than assuming a smooth curve through them, is the more defensible posture.
