Estonia backs slower reduction of free EU carbon allowances

Estonia · Energy / Industry / Regulation · 10 September 2026

Estonia has backed a European Commission proposal that would slow the reduction of free carbon allowances for industrial heat and fuel processes under the EU Emissions Trading System.

Under the existing methodology, free allocations for the affected processes would fall by about 34% in 2026–2030. The Commission proposes reducing the decline to about 18%.

The Estonian government estimates that the change would leave its ETS-covered industrial companies with around 20,000 additional free allowances, worth approximately €1.5 million a year at current estimates.

Tallinn also wants the relief to cover the oil-shale sector and argues that free allocations should remain available for as long as industries lack commercially viable technologies for substantially reducing emissions.

Estonia is additionally seeking stronger mechanisms to limit rapid movements in allowance prices. Under the Commission proposal, the trajectory under which new allowances effectively disappear would extend from around 2039 under current rules to approximately 2047–2048.

These are Estonia’s negotiating positions on proposed EU-level changes, not new ETS rules already in force.

Source: Government of Estonia, September 10, 2026.