The European Commission could extend the allocation of free allowances

The free allowances for the sectors covered by the Carbon Border Adjustment Mechanism (CBAM) are due to be phased out by 2034. The Commission acknowledges that hard-to-abate emissions will remain after 2040 and would be prepared to consider a more gradual decarbonisation pathway for these sectors. The Commission could also extend the allocation of free allowances, making them conditional on investment in Europe, without specifying at this stage the nature of that investment.