Changes from plenary report to adopted text

Recital 1: (1) The Union is committed to achieving climate neutrality by 2050 at the latest and negative emissions thereafter, which includes the objectives of reducing net greenhouse gas emissions by at least 55% by 2030 and 90% by 2040, in line with the European Green Deal4 and the European Climate Law5. The Clean Industrial Deal, as set out in the Commission Communication of 26 February 20256, underscores the need to align industrial competitiveness with climate ambition, ensuring that the transition to a climate-neutral economy is both just and economically resilient, while also maintaining the competitiveness of industrial sectors and averting the risk of carbon leakage. / 5 Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (OJ L 243, 9.7.2021, p. 1, ELI: http://data.europa.eu/eli/reg/2021/1119/oj).

Recital 2: (2) The Union’s environmental objectives, as set out in Article 191 of the Treaty, include preserving and improving the quality of the environment and promoting measures at international level to address global environmental challenges. They are pursued among other things through carbon pricing instruments, such as the Union’s Emission Trading System (‘EU-ETS’) established by Directive 2003/87/EC7 . Where the Union’s international partners have policy approaches that are significantly below the level of the Union’s climate ambition, production in third countries is not subject to comparable carbon constraints. This asymmetry risks incentivising the relocation of production of carbon-intensive goods – a phenomenon known as carbon leakage – which would undermine the attainment of the emission-reduction objectives of Directive 2003/87/EC. Such relocation may ultimately lead to an overall increase in global greenhouse gas emissions, thereby compromising the environmental integrity and effectiveness of the Union climate policy. To address that risk, the Union-wide emissions cap has been reduced in a gradual way with some sectors still receiving up to 100% of the allowances for free. Moreover, allowance price spikes have been prevented through the Market Stability Reserve. Instruments, such as indirect cost compensation under the EU ETS and the EU Innovation and Modernisation Funds, have also contributed to alleviating the EU ETS impact on production costs and to stimulating invest…

Recital 3: (3) The Clean Industrial Deal emphasises the need for financial support, regulatory predictability, and innovation to enable energy-intensive industries to decarbonise without compromising their competitiveness, particularly in sectors exposed to the risk of carbon leakage, including those that produce strategic inputs essential for food security, such as fertilisers. The prevention of carbon leakage constitutes an environmental objective directly linked to the effectiveness of emission-reduction instruments on which Union climate policy relies. Targeted financial support, based on clear conditionality and eligibility criteria, can help ensure that emission reductions are achieved within the Union through decarbonisation of industrial activity, rather than the relocation to jurisdictions with lower environmental requirements giving rise to a risk of carbon leakage.

Recital 3 a (new): (3a) Even though Regulation (EU) 2023/956 includes a mechanism to prevent carbon leakage, it does not contain a permanent solution for export-oriented products or for residual carbon leakage across the wider value chain. This justifies the establishment of a transitional Fund for operators and downstream operators to mitigate costs incurred and to support them in investing in decarbonisation throughout their processes.

Recital 3 b (new): (3b) While this Regulation provides targeted support to achieve decarbonisation, to address the remaining risk of carbon leakage and to preserve the competitiveness of the Union industry, small and medium-sized enterprises not currently engaged in export activities could face structural barriers to accessing international markets, other than carbon price differences. The Commission should assess the presence of those structural market access barriers and the need for additional support mechanisms aimed at facilitating market access and enhancing the competitiveness of such undertakings.

Recital 3 c (new): (3c) In small and peripheral economies, and in Member States with a high share of trade in goods covered by Regulation (EU) 2023/956, operators and downstream operators face a particularly acute remaining risk of carbon leakage on export markets outside the Union, due to higher logistics costs and limited economies of scale.

Recital 4: (4) Energy-intensive industries covered by Directive 2003/87/EC progressively internalise the cost of their greenhouse gas emissions. The reduced Union-wide emissions cap, combined with the gradual phase-out of free allocation provided for in that Directive, requires cost-intensive and rapid adaptations by the industries covered by Directive 2003/87/EC, thereby increasing the short-term risk of carbon leakage such as in sectors that have not yet achieved a transformation of their production processes or transition to low-carbon technologies. That remaining risk of carbon leakage is not fully prevented by Regulation (EU) 2023/956 of the European Parliament and of the Council8 and should therefore be addressed through additional, measures, that are verifiable supporting the transition and promoting the decarbonisation of industrial sectors. In sectors such as fertilisers, that remaining risk could also have a direct impact on agricultural production costs, which could have consequences on Union food security.

Recital 5: (5) To complement the already existing incentives for industrial decarbonisation, this Regulation establishes an additional Union funding instrument. The Temporary Decarbonisation Fund (the ‘Fund’) will provide temporary financial support to operators in carbon intensive sectors that are subject to the remaining risk of carbon leakage due to their production for export to third countries. The Fund will support further decarbonisation efforts and thereby contribute to the global competitiveness of European industry and the Union's strategic production. Such support should be strictly limited to what is necessary to mitigate that remaining risk of carbon leakage, be proportionate, and be conditional upon further demonstrable greenhouse gas emissions reductions. The Fund is an environmental measure and is compatible with the exemption provided for under Article XX of the GATT.

Recital 5 a (new): (5a) The Fund should aim to ensure that support is directed towards genuine decarbonisation transformation. Direct support under the Fund should be subject to clear conditionality with appropriate decarbonisation such as through climate-neutrality plans that prioritise genuine transformation and social criteria.

Recital 6: (6) Revenues generated from the sales of CBAM certificates pursuant to Regulation (EU) 2023/956 will be collected by Member States. As part of its proposal for a new Own Resources Decision9, the Commission has proposed for the next Multiannual Financial Framework 2028-2034 that 75% of the revenue from the sale of CBAM certificates should accrue to the EU budget as an own resource10. In order to ensure the necessary funding, the Fund should be financed from the remaining 25% of the revenues from the sale of certificates, which should constitute external assigned revenue for the purpose of covering the commitments to pay financial support to final beneficiaries of the Fund, and the Commission’s administrative costs to be incurred in managing the Fund. It is necessary to provide for a derogation from Article 21(5) of Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council11 to allocate to the Fund the appropriate share of the revenue generated from the sale of CBAM certificates pursuant to Regulation (EU) 2023/956 as external assigned revenue, while ensuring that the use of such revenue directly contributes to supporting industrial decarbonisation and thereby maintaining the competitiveness of exposed sectors, with a view to preventing the relocation of production and strengthening the Union’s strategic autonomy.

Recital 7: (7) The Fund’s resources should only be used to cover the commitments to pay financial support to the final beneficiaries and the administrative costs of the Fund. Any unused revenue could be reallocated as additional contributions to international climate finance under Article 9 of the Paris Agreement.

Recital 7 a (new): (7a) The Union is committed to working with and supporting low and middle-income third countries for the reduction of their greenhouse gas emissions, including through the decarbonisation and transformation of their industries, and for their adaptation to climate change. The Commission needs to continue to engage with lower-middle income third countries to support their compliance with CBAM. In accordance with Article 30(6) and (8) of Regulation (EU) 2023/956, the Commission is to periodically assess, report on, and, where appropriate, propose new measures in relation to the CBAM impact on least developed countries and its contribution to the decarbonisation of the manufacturing industry in those countries, as well as to consider allocating unused revenues under the Fund as additional contributions to international climate finance under Article 9 of the Paris Agreement.

Recital 8: (8) The Fund should provide financial support in the years 2027, 2028 and 2029 to the final beneficiaries to address their exposure to the remaining risk of carbon leakage, determinable based on the two-year export production reference period 2026–2027. Given the need to ensure continuity of decarbonisation efforts and address the remaining risks of carbon leakage and the fact that CBAM revenue will only become available in 2028, it is appropriate to allow support under this Regulation to cover actions before the entry into force of this Regulation, in accordance with Article 3(2) of Regulation 2024/2509. Such retroactive eligibility is strictly limited to actions that contribute to the environmental objectives of this Regulation and which are undertaken from 1 January 2026 onwards.

Recital 9: (9) By limiting the initial support period to three years, the Fund should provide short-term support pending a comprehensive review of how best to address the issue of the remaining risk of carbon leakage from 2028 onwards, in the context of the scheduled review of the EU ETS. The transitory character of the Fund precludes any interpretation that it may constitute a precedent, a model or a reference point for the EU ETS review. Accordingly, the existence, operation or cessation of the Fund shall not create any expectation, legal or otherwise, regarding the EU ETS review. The design and implementation of the Fund should not pre-empt the outcome of the scheduled review of Directive 2003/87/EC and the consideration of a permanent export solution under that framework, and needs to remain consistent with the long-term architecture of the Union's carbon-pricing system.

Recital 10: (10) In view of the temporary nature of the fund, its governance should be cost-efficient and -effective and minimise administrative burdens, for both the final beneficiaries of the financial support and the Member States.

Recital 10 a (new): (10a) To allow for early compensation of the beneficiaries’ exposure to the remaining risk of carbon leakage, a call for applications in 2027 should be provided for by the Commission. Beneficiaries should be able to choose to submit a single application in 2028 for the export production reference period 2026-2027 or to submit two separate applications, one in 2027 for the export production reference period 2026, and another in 2028 for the export production reference period 2027.

Recital 12: (12) The Fund should in particular contribute to the decarbonisation objective by providing conditional support to operators of EU-ETS installations which produce goods exposed to the highest remaining risk of carbon leakage in the short term and downstream operators which produce such goods. Those goods should be selected taking into account both their emissions and carbon leakage exposure, using the approach followed to determine the carbon leakage list for the EU-ETS as a starting point and targeting the measure to those goods which remain most at risk of carbon leakage based on an objective indicator.

Recital 13 a (new): (13a) The risk exposure of some goods using products, including agri-food products, covered by Regulation (EU) 2023/956, in particular fertilisers, should also be included in the Fund insofar as some of those products could, in the short term, experience a significant cost increase, as a result of higher prices of imports of intrants and precursors. The Commission should therefore include, if appropriate, specific indicators related to fertiliser-use efficiency and energy-use intensity. The Fund should also include operators of installations directly covered by the EU ETS and their downstream operators and should be able to provide targeted support, limited to the additional carbon related cost.

Recital 13 b (new): (13b) The selection criteria used to determine the scope of covered agri-food products are based on the direct and indirect costs of the implementation of Regulation (EU) 2023/956 and Directive 2003/87/EC on those product costs, expressed as a proportion of the gross value added, and the sector’s trade intensity with third countries.

Recital 13 c (new): (13c) Downstream operators and installations significantly and demonstrably affected by the combined impact of the phase-out of free allocation under Directive 2003/87/EC and the application of Regulation (EU) 2023/956 on the cost of CBAM-covered inputs, and where they are substantially exposed to international competition on export markets, should be able to receive targeted support under the Fund, with clear eligibility criteria and appropriate decarbonisation conditionalities. However, it is possible that downstream operators do not need to fulfil the same conditionality requirements as operators. Therefore, the Commission should impose less onerous commitments on downstream operators than on operators.

Recital 13 d (new): (13d) Operators of EU ETS installations producing cement clinkers and cement are subject to the phase-out of free allocation under Directive 2003/87/EC and face a remaining risk of carbon leakage on export markets that is not fully addressed by Regulation (EU) 2023/956. The inclusion of cement clinkers and cement products in the scope of the Fund is consistent with the scope of Annex I to Regulation (EU) 2023/956 and with the objective of maintaining the export competitiveness of Union cement producers, including those established in island and peripheral Member States where cement production represents a significant share of industrial output.

Recital 13 e (new): (13e) The financial architecture of the Fund needs to remain dynamic and capable of adapting to market developments. Therefore, the Commission should assess the feasibility and possible impact of an EU ETS secondary market transaction fee in its interim report. If the assessment demonstrates that such a transaction fee will successfully reinforce market stability and strengthen the Fund’s resources, without hindering the daily compliance of EU ETS sectors, the Commission should consider introducing such a transaction fee by 31 December 2028.

Recital 14: (14) Support should be subject to objective, non-discriminatory and pre-established conditions which need to be verified. To ensure that the effect of the financial support to operators is a demonstrable reduction of greenhouse gas emissions, support should be primarily provided to new decarbonisation investments. To reduce administrative burden, the conditions should build on the existing administrative framework established for free allocation under the EU-ETS. To align the conditions with the existing procedure of application for free allocation, financial support to operators should be contingent on the demonstration of the implementation of recommendations included in energy audits or equivalent measures and a legal commitment made for investments to achieve the 2030 targets and milestones referred to in a climate neutrality plan, or a transition plan for climate change mitigation as laid down in Commission Delegated Regulation (EU) 2023/27721a. Financial support should be used by the beneficiaries in particular to finance investments delivering the minimum decarbonisation or energy efficiency effects referred to in section 5 of the Clean Industrial Deal State Aid Framework (CISAF). Beneficiaries should retain the flexibility to select the decarbonisation measures that are most effective in their specific circumstances, provided they comply with the conditionality requirements of the Fund. / 1a Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing …

Recital 14 a (new): (14a) To ensure the protection of Union’s interests and the strengthening of the Union’s economy, beneficiaries should not transfer the financed technology and the facility concerned outside of the Union’s territory, and some of the equipment used as part of the co-financed investments should be sourced from within the Union’s territory. This should not however preclude operators and downstream operators in Ireland from purchasing equipment, supplies, materials or components from suppliers established in Northern Ireland, in recognition of the all-island dimension of Ireland's economy.

Recital 14 b (new): (14b) In order to safeguard social rights, beneficiaries of the Fund should respect relevant labour law and applicable collective agreements.

Recital 15: (15) Following the submission of applications, the methodology for calculating the financial support by the Commission should be laid down. That calculation should take into account the annual average of the closing prices of EU-ETS allowances on the auction platform for the years 2026 and 2027 as those years are the reference years for which the support is awarded and better reflect the cost of addressing the remaining risk of carbon leakage. The calculation should also consider the level of the carbon price in the export market or the absence thereof, which has an impact on the carbon leakage risk. Following the calculations, the Commission should establish and make publicly available a list identifying all beneficiaries and their respective calculated financial support.

Recital 16: (16) The Commission should, based on its calculations, publish a decision setting out the amount allocated to each Member State specifying the amounts payable to each final beneficiary in the Member State. That decision should constitute a legal commitment in relation to the final beneficiaries within the meaning of Regulation (EU, Euratom) 2024/2590 of the European Parliament and of the Council16 . The Commission should thereafter, in a timely manner, disburse to the national competent authorities the amount allocated to each Member State, corresponding to the financial support given to final beneficiaries in that Member State. The competent authorities should then timely disburse the support to their respective final beneficiaries.

Recital 17: (17) To ensure the prevention, detection and tackling of fraud, corruption, conflicts of interest and other irregularities affecting the Union’s financial interests and objectives of this Regulation, the Commission, the European Court of Auditors and the European Anti-Fraud Office (OLAF) should have the powers conferred on them by Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council17 and Regulation (EU, Euratom) 2024/2509 to carry out audits and investigations concerning the use of Union funds under this Regulation, including through risk-based controls and the use of digital tools for data-matching with EU ETS and CBAM registries. For the Member States participating in the enhanced cooperation in accordance with Council Regulation (EU) 2017/193918 , the European Public Prosecutor’s Office (EPPO) should investigate and prosecute offences against the Union’s financial interests. The Commission, supported by the relevant Member State authorities, should verify that the final beneficiaries have used the financial support to carry out the investments in compliance with the conditions set out in this Regulation and should take legal action to recover the funds in case of non-compliance.

Proposal for a regulation Recital 17 a (new)

Amendment: (17a) The provisions of this Regulation as well as its governance arrangements should be conducive to proper decision-making by the budgetary authority and to appropriate parliamentary oversight. In particular, any provisions regarding the use of external assigned revenue should be subject to particular reporting requirements.

Proposal for a regulation Recital 17 b (new)

Article 1 – paragraph 2: 2. The Fund shall provide financial support in the period 2027-2029 to address the remaining risk of carbon leakage associated with carbon intensive goods produced and exported by eligible operators of installations and eligible downstream operators in the period 2026-2027.

Article 2 – paragraph 1 – point b a (new): (ba) ‘downstream operator’ means any legal or natural person established in a Member State that uses goods listed in Annex I to Regulation (EU) 2023/956 as primary material inputs in its production processes to produce eligible goods;

Article 2 – paragraph 1 – point c: (c) ‘eligible good’ means any of the goods listed in the Annex, as well as any goods subject to a heightened remaining risk of carbon leakage identified pursuant to Article 6(2) and (3);

Article 3 – paragraph 3: 3. Each Member State shall communicate to the Commission the exact annual amounts to contribute to the Fund for the year 2026 by 31 July 2027 and for the year 2027 by 31 July 2028, respectively. Member States shall transfer to the Fund a monetary amount that corresponds to the amount referred to in paragraph 2 of this Article respectively by 30 September 2027 for the revenues of the year 2026 and by 30 September 2028 for the revenues of the year 2027. The amounts contributed shall be assigned revenue to the Fund in accordance with Article 21(5) of Regulation (EU, Euratom) 2024/2509. By way of derogation from that provision, the amounts contributed shall constitute external assigned revenue.

Article 3 – paragraph 4: 4. Revenues remaining after the full disbursement of funding to final beneficiaries and payment of administrative costs of the Fund shall not be automatically carried over to be used by the Fund. By way of derogation from Article 12(4), point (c), of Regulation (EU, Euratom) 2024/2509, the Commission may use those revenues for the purpose of the Union’s international climate finance commitments, in particular under Article 9 of the Paris Agreement;