Constr., Infra & Materials (AO) | Cement's EU ETS update: CO2 benchmark proposal sees the light of day

Research evidence excerpt

Constr., Infra & Materials (AO) | Cement's EU ETS update: CO2 benchmark proposal sees the light of day

's free allocation of CO2 allowances for the European operations of cement

manufacturers.

Despite this lower estimated allocation, historical CO2 allowance inventories and their rebuilding over the last years of lower

production should allow the listed manufacturers to avoid having to buy allowances over the medium term.

In contrast, we expect the opex of the less CO2-efficient European players (not listed) to be boosted by the allowance purchases

resulting from the reduction in free allocations, forcing these producers to raise prices over the next few years. The larger and

more efficient operators should benefit from the upward pricing pressure in their European footprint, as they should not have to

incur in increased decarbonisation opex over the medium term.

What about long-term pricing power? The MSR cap proposal (April 2026)...

A proposal to lift the cap on the Market Stability Reserve (MSR) was announced by the European Commission in early April this

year, a small but relevant change that is expected to result in CO2 price moderation over the longer term.

An article published by the German newspaper Handelsblatt reported in April that the European Commission planned to stabilise

the EU ETS amid the current environment of economic uncertainty (geopolitical tensions, tariffs, competition) by making the

system more flexible: tweaking the Market Stability Reserve, or MSR, with April's proposal, and later implementing a broader

reform (proposal expected in July). The article highlighted, however, that this first initiative was facing criticism.

The newspaper commented that the European Commission’s proposal to remove the current cap of 400m CO2 certificates in the