The proposal presented by the Commission on December 17, 2025, covers producers in the aluminum, fertilizer, iron, and steel sectors, as well as other energy-intensive sectors at risk of carbon leakage.
The gradual phasing out of free allocations for CBAM-compliant products under the EU Emissions Trading System (ETS) by 2034 places exporting EU producers at a competitive disadvantage in international markets. In this context, the Temporary Decarbonization Fund (TDF) will act as a temporary bridge solution and provide short-term support for specific products during the 2026-2027 production period.
The proposed fund will be financed by 25% of the revenues generated by member states from CBAM certificates, and the total resources of the fund are estimated at approximately EUR 633 million. The fund will be directed exclusively toward producers of designated energy-intensive products, with applications to be accepted in 2028 and payments to be made in 2029.
For the fund to be applicable, operators must have implemented energy audit reports or committed to investments in equivalent emission reduction measures. Applications will be evaluated by national competent authorities, and the amount of support will be calculated based on the losses incurred due to the removal of free allocations.
The EU Commission will implement the TDF through a direct management model, and national competent authorities (NCA) will review applications and process payments. Details of the support provided under the fund will be reported to the EU legislative bodies by the end of 2030.
Sector representatives and experts have concerns regarding the temporary and limited scope of the fund. Eurofer criticized the narrow range of products covered by the fund and its short duration, while the European Aluminium Association demanded specific solutions for exports. Environmental organizations, on the other hand, warned that the fund could undermine the integrity of carbon pricing.
The EU Commission stated that the TDF aims to reduce the risk of carbon leakage in energy-intensive sectors during the ETS and CBAM compliance process and to provide support to producers during the transition period.
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