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Free CO2 allowances allocated to a large number of industrial sectors at risk of carbon leakage could undermine incentives to move towards low carbon technologies under the EU's Emissions Trading Scheme (ETS), a Carbon Trust report suggests. The report claims that many industries named on the EU's list of 164 sectors at risk of carbon leakage are, in fact, unlikely to suffer significant leakage.

Ongoing disagreements within the European Commission over proposals on the auctioning of carbon allowances from 2013 will most likely lead to further delays in their eventual adoption.

The Commission intends to adopt a proposal on a carbon tax on energy use before the summer, following months of internal discussions (see February 2010 Editorial). The purpose for such tax would be to introduce a CO2 element into the 2003 Directive on Taxation of Energy Products and bring it into line with the EU’s climate objectives.