Hundreds of millions of euros are set to flow into a new EU fund to help heavy industries cope with decarbonisation costs. But auditors are asking a simple question: will this actually lead to more green investment — or is it just another complex system where money moves around without much changing on the ground?
The European Court of Auditors (ECA) reported on a number of weaknesses in the proposed Temporary Decarbonisation Fund. In its current form, the scheme does not meet the principles of sound financial management.
The fund, proposed by the European Commission in December 2025, would support businesses in sectors like fertilisers, aluminium, iron, and steel. The idea is to prevent their relocation from the EU—so-called carbon leakage—while maintaining the EU’s climate goals․
However‚ the auditors question whether it will actually drive new decarbonisation efforts. The rules are very similar to the conditions companies must meet to receive free allowances under the EU Emissions Trading System (EU ETS) for 2026 and 2027. Therefore, the system may just redistribute money within already existing policy framework. Because payments would be based on past production levels‚ new decarbonisation investment would not be rewarded.
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Questions over exemptions
The ECA also expressed concerns with the proposed derogations from EU financial regulation. The Commission has requested three exemptions, but ECA found one of them unjustified: it is not in line with basic budgetary principles‚ and alternatives exist․
A second exemption, covering retroactive payments, drew criticism for being vague. The auditors noted that the proposal does not clearly explain how widely it would be applied.
The Commission estimates that the fund would take in €632 million in revenues and spend of €265 million. The ECA pointed out that this gap raises questions about whether member states should really be required to contribute 25 per cent of the revenues from the sale of certificates under the Carbon Border Adjustment Mechanism (CBAM).
Unpredictable revenues
The auditors also highlighted considerable uncertainty on future revenue and expenditure. Income will depend on the prices in the EU ETS and the sale of CBAM certificates. Both are difficult to predict‚ especially at the early stage of a new system like CBAM․
The ECA also criticised the timing of the cash flows. Member states would collect the revenues during 2028 and 2029‚ but the companies would receive the payments only in 2029. This means that €308 million due in 2028 would sit unused for at least a year. Since it is not clear how this money would be handled in the meantime, the auditors suggested that making a single payment in 2029 would be more efficient.
Broader budget context
Despite these concerns, the auditors also acknowledged some positives. In particular, the proposal builds on existing administrative systems used for allocating ETS allowances. That could reduce the administrative burden for companies applying for support.
The Temporary Decarbonisation Fund is also part of the discussion on the next long-term EU budget for 2028–2034. The Commission has proposed that 75 per cent of CBAM revenues should become an EU “own resource”, with the remaining 25 per cent going back to member states. This proposal has not yet been approved by the Council or ratified by all member states.
