Free allocation in the EU ETS by 2030: paving the way for decarbonisation of industry

5 November 2015 - Carbon Trends

By Matthieu JALARD, Émilie ALBEROLA et Lara DAHAN

In October 2014, the EU Council committed to continue free allocations until 2030, even if significant evidence of carbon leakage since 2005 has not been demonstrated. This raises the question as to whether or not the proposed free allocation mechanism can effectively mitigate carbon leakage risks through to 2030 while preserving incentives for low carbon innovation. According to our analysis[*], in order for the EU ETS to be consistent with the decarbonisation roadmap for industry, three main aspects need to be addressed.

  • Flexible allocation to enhance emission reduction incentives
  • Targeted free allocation to ensure predictable long-term protection.
  • Promoting innovation while steering the market for low-carbon products.

[*] Jalard, M. and Alberola, E., 2015, Free allocation in the European Emissions Trading System (EU ETS): Identifying efficient mechanisms through to 2030. Climate Report N.51, I4CE – Institute for Climate Economics,

Free allocation in the EU ETS by 2030: paving the way for decarbonisation of industry Download
To learn more
  • 07/02/2025 Foreword of the week
    Bridging the gap: high-level climate & development finance commitments and the reality on the ground

    The 4th International Conference on Financing for Development (FFD4) in Seville represents a milestone for delivering on development (including climate action) goals, a decade after the adoption of the Sustainable Development Goals and the Paris Agreement. The “Seville Commitment” was adopted on June 30th, albeit in the absence of the United States – demonstrating that widespread support remains for a comprehensive package to finance development. However, the outcome also embodies the growing chasm between high-level commitments and the reality of financing for development and climate action on the ground. Recent research by I4CE attempts to bridge this gap on two crucial issues. 

  • 07/02/2025
    From headline trillions to actual millions: climate financing needs estimates in the age of implementation

    As climate finance debates evolve from pledges to implementation, this report critically reviews the methodologies and narratives behind existing climate financing needs estimates to examine how they might be used to guide practical efforts in the years to come, and where the most urgent improvements are needed. From headline trillions to actual millions, the challenge ahead is not just about determining how much is missing – the focus should be on closing this gap in practice.

  • 06/13/2025 Foreword of the week
    The unlocked potential of carbon revenues to help fill the climate finance gap

    Climate negotiations are taking place next week in Bonn, with finance once again high on the agenda. COP 29 ended last year with a New Collective Quantified Goal (NCQG) –revised climate finance target to replace the USD 100 billion goal. The NCQG decision put forward a commitment by developed countries to lead in providing USD 300 billion per year by 2035 for developing countries, as well as a proposal to work on a roadmap to scale up climate finance for developing countries to reach a level closer to the estimated needs –the ‘Baku to Belem Roadmap to 1.3T’ (USD 1.3 trillion). The latter must be delivered at the end of the year at COP 30, and strong efforts are being put in the task by the Brazilian Presidency.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer