A group of MEPs led by Julie Rechagneux (PfE) has asked the European Commission whether accumulated free carbon allowances under the EU Emissions Trading System (EU ETS) risk distorting competition in sectors covered by the Carbon Border Adjustment Mechanism (CBAM). In a written parliamentary question dated 4 June 2026, the MEPs warn that companies holding large stocks of unused free allowances may face lower carbon costs than importers subject to CBAM, potentially undermining the mechanism's level-playing-field objective.
The question, co-signed by 15 MEPs from the PfE, PPE, and ESN groups, targets three specific points: the Commission's assessment of how free allowance stocks affect competition in CBAM sectors; whether future CBAM or ETS revisions will address any resulting imbalances; and whether free allowances are actually contributing to decarbonisation as intended. The MEPs note that free allowances were meant to support the decarbonisation of the most exposed industries, but large unused reserves raise doubts about their effectiveness.
The question reflects ongoing concerns about the interaction between CBAM and the ETS, particularly as both mechanisms are under review. The Commission is expected to respond within approximately six weeks, and its answer will signal whether it sees a need for corrective measures such as phasing out free allowances faster or adjusting CBAM's scope to account for accumulated stocks.
If the Commission acknowledges a distortion, it could lead to tighter rules on free allowance allocation or accelerated reductions in free allowances for CBAM sectors. Conversely, a dismissive response would suggest the Commission views the current stockpiles as a transitional issue. The outcome will affect EU producers, who may face higher costs if free allowances are curtailed, and importers subject to CBAM, who seek assurance that carbon costs are comparable. Environmental groups and EU taxpayers also have a stake, as unused allowances may represent a missed opportunity for emissions reductions.