Cepi seeks stronger carbon leakage shield in EU ETS overhaul

Cepi, the European pulp and paper industry association, has urged the European Commission to strengthen carbon leakage protection in the 2026 reviews of the EU Emissions Trading System Directive and Market Stability Reserve Regulation. It warns that shrinking free allocation and the loss of biomass exemptions could cost the sector roughly EUR 1 billion (USD 1.12 billion) a year by 2030, and calls for revised benchmarks, removal of the biomass exclusion and continued compensation for indirect electricity costs.

Why this mattersA EUR 1bn annual carbon cost by 2030 would squeeze pulp and paper margins and could shift investment toward regions with lower carbon pricing.

• Cepi estimates a combined annual financial impact of roughly EUR 1bn by 2030 from the ETS changes.
• Ten of eleven sector product benchmarks face maximum reductions for 2026-2030.
• About 40 installations relying at least 95% on biomass would lose free allocation under current rules.
• Cepi wants 2021-2025 benchmarks retained for 2031-2040 and the 95% biomass exclusion removed.
• The association seeks a zero Market Stability Reserve intake rate and continued indirect carbon cost compensation.
• Cepi says the sector has cut emissions by more than 55% since 2005.

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