European Building Materials: ETS reform: consistent with expectations, clearing event for EU cement?

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European Building Materials: ETS reform: consistent with expectations, clearing event for EU cement?

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European Building Materials

ETS reform: consistent with expectations,

clearing event for EU cement?

Government Regulations

EU ETS reform proposal published 17 July 2026

The European Commission published its proposal to reform the ETS (Emission Trading Equity

Scheme). Some of the changes were leaked in the press in the last days and the initial Europe

proposals looks broadly in line with expectations. CO2 prices have been an important Building Materials

driver of sentiment on cement stocks with European exposure this year, in particular Arnaud Lehmann >>

Holcim, Heidelberg Materials and Buzzi. Markets have seen higher CO2 prices as a net Research Analyst

positive for EU cement stocks and the upcoming reform (partly aimed at reducing those MLI+44 (UK)20 7995 8302

prices with more free CO2 allocations for longer) as a downside risk. arnaud.lehmann@bofa.com

Allison Sun >>

Key relevant changes for the EU cement sector ResearchMLI (UK) Analyst

We see three key adjustments in the proposal that would be directly relevant for the EU +44 20 7996 1052

allison.sun@bofa.com

cement sector: 1/ the Linear Reduction Factor (LRF) is set at 3.7% for 2031-2035 and

1.7% for 2036-2040 (from 4.3% previously). This was largely discussed in the press in

the last weeks (and in line) and account for the fact that incremental decarbonisation

gains become exponentially harder, 2/ for CBAM sectors (cement, steel, etc), the

reduction of free allocations will be slowed and the phase-out extended until 2038

(currently until 2034). Some expectations were beyond 2040, so this is potentially earlier

than expected. 3/ The new investment booster will be frontloaded with €100bn funding