EU Presidency Proposes ETS Carbon Capture Compromise
Irish Presidency circulates a compromise text on the EU Emissions Trading System revision that adds conditions to the free allowance allocation.
Updated on Nov. 3, 2026 in Electric Vehicles
The Irish Presidency of the Council of the European Union submitted an initial compromise text on the EU Emissions Trading System revision to Member States. The text leaves the linear reduction factor, market stability reserve, conditional free allocation and international credits unchanged.
Why it matters
The compromise clarifies how free allowances tied to carbon capture and storage investments would be treated, shaping how the EU carbon market rewards decarbonisation for industry. Its handling of which capture technologies qualify could affect future investment decisions across the bloc.
The compromise text keeps 80% of free allowances allocated in advance, with 20% allocated after investments, and keeps the 80% in place even if required decarbonisation investments are not made. The initial July proposal limited carbon capture eligibility to BioCCS and DACCS, and the eligibility of other technologies is left for the Commission's 2034 review.
The players
Irish Presidency of the Council of the European Union
Ireland holds the rotating presidency of the Council of the EU and has circulated the compromise text to Member States. The presidency role rotates among member states every six months and shapes the agenda of Council negotiations.
European Commission
The European Commission is the EU's executive body that proposed the original ETS revision and will produce the 2034 report on carbon capture eligibility. It holds the exclusive right to initiate EU legislation.
The details
The compromise specifies that failure to make required decarbonisation investments does not trigger withdrawal of the 80% advance allocation of free allowances. It also invites the European Commission to examine whether other carbon capture and storage technologies should be eligible in its 2034 report.
Timeline
17 July: Commission submitted the initial ETS revision proposal.
Tuesday, 3 November: Agence Europe obtained the compromise text.
4 and 9 November: The Council's Working Party on the Environment examines the compromise text.
2034: Commission report on carbon capture eligibility due.
Roadmap
The compromise builds on the EU ETS Directive, which has been the bloc's central carbon pricing mechanism since 2003 and is being revised to tighten emissions caps. Its treatment of carbon capture eligibility reflects a broader European push to decide which removal technologies count toward climate targets.
Carbon pricing under the ETS feeds into the cost structure of manufacturers across the EU, which can influence vehicle production and the pricing of parts and materials. Changes to free allowance rules affect which industrial facilities bear the full cost of emissions over time.
The takeaway
Carbon pricing rules that tie free allowances to decarbonisation investment are a lever that can accelerate cleaner production across the EU economy. Watching how the Commission defines eligible capture technologies in 2034 will show how far the bloc is willing to broaden its climate toolkit.
What happens next
The Council's Working Party on the Environment will examine the compromise text on 4 and 9 November.
Further reading
Explore more on Electric Vehicles to see how EU climate policy is shaping the automotive sector.
