Italy and the Czech Republic have warned Brussels that Europe’s industrial base faces lasting damage unless the bloc loosens its green rules, pointing to what they call an unprecedented energy shock. Their joint letter, sent ahead of next week’s EU leaders’ summit, arrives as decarbonisation targets collide with the daily realities of factory floors.
“While security of supply remains the immediate priority, the combination of some of the world’s highest energy prices, high carbon costs and exceptional fuel prices risks further weakening European manufacturing and accelerating the relocation of production and investment,” the letter says.
The warning matters because relocation means jobs. When production leaves Europe, workers lose their livelihoods. The letter puts that argument at the heart of its case.
The Meloni-Babiš Plan
Italian Prime Minister Giorgia Meloni travelled to Prague last week to meet her Czech counterpart, Andrej Babiš, and coordinate a plan before the Brussels summit. The two capitals are targeting the EU’s carbon market, already under political scrutiny, as well as its recently weakened methane rules. They’re also trying to build a wider coalition inside the European Council.
Their proposal calls for targeted relief for struggling factories. It would extend free carbon allowances for heavy industry under the Emissions Trading System (ETS) and pause the phase-out of free allocations for sectors covered by the bloc’s carbon border tax. Leaders are expected to focus heavily on competitiveness when they meet on October 15.
The two governments call the measures “temporary” interventions that “preserve long-term climate objectives.” But several demands would significantly change how the EU applies climate rules to industry.
A Push for Suspension
The letter goes beyond extensions. “A temporary suspension of the EU ETS would provide immediate relief to European industry from carbon costs,” it says. “However, in the absence of sufficient support for such an option, it is worth considering a number of targeted and immediately actionable alternatives that the European Council could promote to alleviate the impact of the current shock and complement measures already announced at European level.”
Italian Defence Minister Guido Crosetto has openly argued for suspension until economic conditions improve. “There would be better times” to reintroduce the carbon market to protect the environment, he said. “A tax like the ETS today is unjust, absurd, unsustainable in international competition, and creates inequalities because it falls indiscriminately and equally on all European end consumers,” Crosetto wrote on X.
His point about consumers touches a real tension. Carbon pricing applied equally to everyone can hit hardest those with the least room in their budgets, a design problem that critics of the ETS have raised for years.
A Wider Current
The Rome-Prague initiative isn’t isolated. Austria’s Energy Minister Wolfgang Hattmannsdorfer made a similar case on 24 September, on the sidelines of a competitiveness ministers’ meeting in Brussels. He called for “economic patriotism” to keep industries and jobs in Europe, arguing that European production is crucial for regional wealth, welfare and environmental standards.
The pattern is clear: several capitals now want industrial competitiveness to carry more weight in the application of climate policy.
Why This Matters:
The fight over the ETS isn’t simply industry versus climate. It concerns who bears the cost of the transition and whether Europe can protect jobs without abandoning the targets that justify the system. Italy and Czechia say their measures are temporary, but several would reshape how climate rules apply to heavy industry. A just transition needs more than carbon pricing; it needs public investment and social protection so workers and households aren’t left to absorb energy shocks alone. If leaders on October 15 respond only by loosening rules, without a plan to shield consumers and fund clean industry, the EU risks trading long-term credibility for short-term relief.