EU to support energy-intensive sectors with temporary funds for decarbonization
The proposal, submitted by the Commission on December 17, 2025, applies to producers of aluminum, fertilizers, iron and steel industries, as well as other energy-intensive industries at risk of carbon leakage.
The gradual phase-out of the free distribution of CBAM-compliant products under the EU Emissions Trading System (ETS) by 2034 puts European exporting manufacturers at a competitive disadvantage in international markets. In this context, the Temporary Decarbonization Fund (TDF) will act as a temporary interim solution and provide short-term support for specific products during the 2026-2027 production period.
The proposed fund will be funded by 25% of the income earned by Member States from CBAM certificates, and the total resources of the fund are estimated at approximately 633 million euros. The fund's funds will be allocated exclusively to manufacturers of certain energy-intensive products, applications for which will be accepted in 2028, and payments will be made in 2029.
In order for the fund to be applicable, operators must have energy audit reports or commit to investing in equivalent emission reduction measures. The applications will be reviewed by the national competent authorities, and the amount of support will be calculated based on the losses incurred due to the cancellation of the free allocations.
The EU Commission will implement TDF through a direct management model, and national competent authorities (NCAs) will review applications and process payments. Detailed information on the support provided under the fund will be submitted to the EU legislative bodies by the end of 2030.
Representatives of the sector and experts are concerned about the temporary and limited coverage of the fund. Eurofer criticized the narrow range of products covered by the fund and its short duration, while the European Aluminum Association demanded specific export solutions. Environmental organizations, on the other hand, have warned that the fund could undermine the integrity of carbon pricing.
The EU Commission stated that the TDF aims to reduce the risk of carbon leakage in energy-intensive sectors during the ETS and CBAM compliance process, as well as to support producers during the transition period.
Author: SteelRadar Editorial Team
Steelradar.com