Estonia is supporting a European Union proposal that would reduce the pace at which free emissions allowances are withdrawn from certain industrial sectors between 2026 and 2030.

The Estonian government has approved its position on proposed changes to the European Union Emissions Trading System. The government supports increasing the amount of free emissions allowances available to companies during the transition period.

Under the existing rules, the number of free allowances based on heat and fuel benchmarks would decrease by 34 percent between 2026 and 2030. The European Commission has proposed reducing that decline to 18 percent.

Estonia supports the Commission’s approach, saying it better reflects the ability of heat and fuel producers to reduce carbon emissions while adapting their production processes.

The government has pointed out that companies need sufficient time to introduce new technologies and make changes to their production systems. A faster reduction in free allowances would increase costs for affected businesses.

Estonia also considers the issue important for the competitiveness of European companies. Higher costs associated with emissions allowances can affect businesses operating in sectors that face strong international competition.

The proposed adjustment would give companies more time to invest in cleaner technologies and adapt their production processes while the EU continues working toward its climate objectives.

Estonia was among the EU member states that previously raised concerns about the pace of the reduction in free allowances and called for a more gradual approach.

The government believes that the proposed 18 percent reduction provides a more practical transition for affected businesses while maintaining the broader objectives of the EU emissions-trading system.

The issue will now continue through the European Union’s legislative process, where member states will discuss the proposed changes with the European Commission and the European Parliament.