Five European Union member states are urging the European Commission to rethink its carbon market rules, arguing that the current pace of decarbonisation is putting heavy industry at a competitive disadvantage. In a joint document seen by Euronews, Austria, Czechia, Hungary, Slovakia and Poland call for more flexibility in the Emissions Trading System (ETS) to give factories more time and support to cut emissions without losing ground to producers outside the bloc.
The appeal comes as EU industry ministers gathered in Brussels to discuss the Commission's proposed revision of the ETS, which was added to the Competitiveness Council agenda because of its direct impact on manufacturing. Austrian Industry and Energy Minister Wolfgang Hattmannsdorfer told reporters that European companies face enormous costs to decarbonise while competing with firms in regions that do not carry the same carbon price.
“We need something like an 'export discount' because we have a huge problem when we start doing business outside,” Hattmannsdorfer said. He called for “economic patriotism” to keep industries and jobs in Europe, arguing that maintaining domestic production is essential for regional wealth, welfare and environmental standards.
High costs, global competition
Under the ETS, companies in carbon-intensive sectors such as steel, cement and chemicals must buy allowances for their emissions. The more they emit, the more they pay. While the system has helped cut emissions from covered sectors by more than 50% since 2005 and generated over €270 billion in revenues, the five governments argue that the burden is becoming unsustainable.
European factories already face high electricity costs, and businesses warn that if production becomes too expensive in Europe, they could shift operations elsewhere. Austria's central bank highlighted the pressures in late 2025, describing the country's export industry as “under pressure on several fronts”. Weak German industry, US tariffs, high wage and energy costs, and growing competition from China were all weighing on exports.
The outlook has since worsened as the conflict with Iran has pushed up energy costs, adding further strain on Austria's – and Europe's – industrial competitiveness and green transition. As rising energy prices ripple through the economy, the cost of doing business in Europe continues to climb.
Basics before green investment
The five governments argue that factories should only be required to make major decarbonisation investments when basic conditions are in place – including affordable electricity, sufficient grid capacity, hydrogen supplies, and infrastructure to transport and store captured CO2. Removing protection from carbon costs before those conditions exist could have the opposite effect to that intended by Brussels, the document argues.
“European industry is being asked to undertake multi-billion-euro investments in electrification, hydrogen, CCS/CCU and new production processes. These investments require affordable electricity, functioning grids, hydrogen as well as adequate input materials availability and CO2 transport and storage infrastructure,” the document states.
Alex Eggert, head of the steel trade body Eurofer, said the industry would reach climate-neutrality while producing in Europe. “We need an ETS that rewards first movers while supporting the decarbonisation of the whole industry. Withdrawing carbon leakage protection too quickly risks undermining the very investments needed to make the transition,” Eggert said.
The push for flexibility comes amid broader tensions over the bloc's energy and climate policy. Some member states have resisted centralising power grid tariffs, while the Commission faces pressure to balance environmental goals with economic realities. The debate over the ETS revision is expected to intensify in the coming months as the Commission finalises its proposal.
For now, the five countries are making clear that they want a carbon market that works for industry, not against it. As Hattmannsdorfer put it, the goal is to keep European production competitive while still moving towards a greener future. Whether Brussels will heed their call remains to be seen.
