The European Parliament is seeking to bring forward financial assistance for European industrial exporters exposed to carbon costs, proposing that support under the Temporary Decarbonisation Fund begin in 2027 rather than 2028. The initiative addresses a gap in the EU’s carbon protection framework: while the Carbon Border Adjustment Mechanism (CBAM) targets emissions costs associated with imports, it does not provide equivalent protection to European manufacturers competing in international markets.
On 15 September 2026, Parliament adopted amendments to the proposed fund by 433 votes in favour, 97 against and 146 abstentions. The amendments would make funding available during 2027–2029, extending the period of support by one year compared with the European Commission’s original proposal, which covered 2028–2029.
The legislation remains under negotiation. Parliament’s amendments have not yet become binding rules, and the proposed funding arrangements are therefore subject to the outcome of the legislative process.
Proposed Fund Addresses Export Competitiveness
The proposed financial assistance would target eligible producers facing carbon leakage risks linked to exports beyond the EU. Parliament’s amendments could also broaden access to certain downstream manufacturers and businesses associated with fertilisers.
The initiative reflects the difference between the treatment of imports entering the EU and European goods sold in markets with less stringent carbon pricing. Under the EU Emissions Trading System (EU ETS), European steel and aluminium producers incur emissions-related costs. CBAM is designed to address the carbon costs embedded in covered imports, but it does not automatically offset the corresponding burden on EU exporters selling into countries without comparable carbon pricing systems.
This imbalance affects manufacturers competing internationally in sectors such as construction, engineering and industrial manufacturing, where carbon-related production costs can influence commercial competitiveness.
Decarbonisation Investments Linked to Eligibility
Parliament’s proposed approach would connect financial support to credible industrial decarbonisation measures rather than establish unconditional compensation for emissions costs. Eligible investments could include cleaner production technologies, lower consumption of carbon-intensive materials and changes to industrial supply chains.
Downstream manufacturers seeking assistance would need to demonstrate a meaningful reduction in their exposure to emissions-related costs or show that their investments would lead to lower-carbon production processes.
The proposed framework could support investment cases for electric arc furnaces, lower-emission aluminium production and industrial equipment manufactured using less carbon-intensive materials. Access to funding would be linked to decarbonisation efforts, with downstream operators expected to demonstrate how their activities or investments contribute to reducing carbon exposure.
Energy Costs and Financing Remain Key Constraints
The availability of public support would not remove the need for competitive electricity prices or sufficient market demand. Industrial producers planning substantial capital expenditure must still establish whether expected operating margins will cover debt repayments and deliver acceptable investment returns.
For banks and industrial investors, the proposed fund could become an additional component of project financing structures, particularly for companies facing high upfront costs associated with industrial decarbonisation.
The timing of potential assistance is significant for European steelmakers. EU steel exports fell sharply in the first half of 2026, while producers continued to face high energy costs and weak domestic demand.
The proposed fund would address the export-related dimension of the EU’s industrial transition alongside CBAM’s role in protecting the internal market against differences in carbon costs. Its proposed scope reflects the challenge facing European manufacturers that must finance lower-emission production while remaining competitive in international markets.
