ESG: EU ETS review underway: Efforts being made to reduce costs, such as by enhancing free allocations

Research evidence excerpt

ESG: EU ETS review underway: Efforts being made to reduce costs, such as by enhancing free allocations

Global Markets Research

17 June 2026ESG: EU ETS review underway

Economics - Japan

Research AnalystsEfforts being made to reduce costs, such as by

Japan Economicsenhancing free allocations

Kengo Tanahashi - NSC

Impact on industry is a common theme for Japan too kengo.tanahashi@nomura.com

+81 3 6703 1295

EU ETS review scheduled for July 2026, focusing on burden reduction Kyohei Morita - NSC

A comprehensive review of the EU's emissions trading system (ETS) is scheduled for July kyohei.morita@nomura.com

+81 3 6703 13952026, the thrust of which is gradually becoming clear. On 11 May, the European

Commission presented a policy with regard to free allocations covering emissions in Japan ESG research

2026–30 that takes into account indirect emissions from the use of electricity for some Kengo Tanahashi - NSC

products such as steel and limestone (Figure1). Since free allocations to date have been kengo.tanahashi@nomura.com

confined to direct emissions from production activities such as plants, the policy will likely +81 3 6703 1295

result in an increase in free allocations, which should reduce the burden on companies. Kazuya Nakagawa - NSC

The European Commission estimates the cumulative financial impact from this at €4.0bn. kazuya.nakagawa@nomura.com

+81 3 6703 1184

The European Commission also indicated that it could propose sector-specific fallback

benchmarks at the July ETS review. While the details are unclear, these measures are

intended to address concerns among industries that are substantially affected by ETS,

and are positioned as "timely and effective support". We think this measure is also

important in that it should reduce the costs of ETS.