The Temporary Decarbonisation Fund (TDF) is a proposed EU mechanism, not yet law, that would channel a share of CBAM certificate revenue to EU producers facing rising export costs and to industrial operators investing in decarbonisation. On July 6, 2026, the European Parliament's ENVI committee adopted its negotiating position on the fund by 59 votes to 16, with 6 abstentions, advancing the proposal (COM(2025)990, procedure 2025/0418(COD), rapporteur Pascal Canfin) toward trilogue but leaving it well short of final adoption. The vote widens the fund beyond the European Commission's original design in three ways: an earlier start date, eligibility for downstream operators as well as producers, and a different destination for unspent money. This page sets out what the TDF would pay for, what the Commission proposed in December 2025, what ENVI changed on July 6, 2026, and the legislative steps still ahead before any money moves.
What Is the Temporary Decarbonisation Fund?
The Temporary Decarbonisation Fund is a proposed financial support mechanism, funded from CBAM certificate revenue, designed to offset the domestic carbon costs that EU exporters and downstream manufacturers face as EU ETS free allocation phases out. It is not part of the definitive CBAM regime that started January 1, 2026 under Regulation (EU) 2023/956; it is a separate proposal running through the ordinary legislative procedure alongside CBAM itself.
The fund exists to answer a specific gap in CBAM's design. CBAM protects the EU domestic market by pricing carbon into imports, but it does nothing for EU producers selling into export markets outside the EU, where local competitors pay no equivalent carbon price. As EU ETS free allocation phases out between 2026 and 2034, EU exporters absorb rising ETS costs at home with no CBAM-style protection abroad, a problem widely referred to as reverse carbon leakage. The TDF is the Commission's proposed bridge for that gap, using CBAM revenue rather than general EU budget funds to finance it.
Where Does the CBAM Revenue Behind the Fund Come From?
CBAM revenue originates from certificate purchases made by authorized declarants, collected in the member state where each declarant holds its authorization. Certificate sales begin February 1, 2027, run through the Common Central Platform under construction by the Commission, and require declarants to hold at least 50% of cumulative embedded emissions in certificates each quarter, a mechanic covered in full on the CBAM certificates page. Certificate prices track the EU ETS auction price, so the size of the revenue pool moves with the carbon market.
Trade press coverage of the Commission's December 2025 proposal reports that the TDF would draw on 25% of the CBAM revenue collected by member states, with total resources estimated at approximately EUR 633 million over the fund's life. Neither figure appears confirmed in a final legal text as of July 2026, so treat both as reported estimates rather than settled numbers pending the final regulation.
The Commission's Original TDF Proposal
The European Commission proposed the Temporary Decarbonisation Fund on December 17, 2025, as COM(2025)990, alongside its separate proposal to extend CBAM to downstream products. The original design covered a narrower group of beneficiaries and a later start date than what ENVI later adopted. Its core elements were as follows.
- Eligible sectors: producers of certain goods in the aluminium, fertiliser, iron, and steel sectors, with other energy-intensive industries at continued risk of carbon leakage able to qualify
- Funding mechanism: a share of member states' CBAM certificate revenue, administered by the Commission through direct management with national competent authorities processing applications and payments
- Support window: financial support running 2028-2029, structured as a temporary bridge covering the 2026-to-2027 production period, with applications accepted in 2028 and payments made in 2029
- Eligibility condition: applicants needed an energy audit report or a committed investment in equivalent emission-reduction measures
- Unused revenue: any funds not disbursed would return to member states
That design left one group out entirely: any downstream operator that uses CBAM-covered goods, such as steel, aluminium, or fertiliser, as a production input rather than producing them directly.
What ENVI Changed on July 6, 2026
The ENVI committee's position departs from the Commission's proposal on three points, all aimed at widening the fund's reach and moving support earlier. The table below sets the two versions side by side.
| Element | Commission proposal (Dec 17, 2025) | ENVI committee position (July 6, 2026) |
|---|---|---|
| Support window | 2028-2029 | Runs 2027 to 2029 |
| Downstream operators | Not eligible | All downstream operators using CBAM-covered goods as inputs become eligible |
| Unused revenue | Returned to member states | Redirected to EU international climate finance under the Paris Agreement |
| Committee vote | Not applicable | 59 for, 16 against, 6 abstentions |
Two of these changes matter most for planning purposes. Extending the window back to 2027 means support could reach producers a full year earlier than the Commission intended. Opening eligibility to all downstream operators is a structural expansion: it moves the fund from a narrow producer subsidy toward something closer to a general industrial support instrument for any firm whose input costs rise because of CBAM-adjacent carbon pricing, including fertilizer users further down the supply chain.
Who Would Be Eligible for TDF Support
Under the ENVI committee's position, three categories of applicant could draw on the fund once it takes effect.
- EU producers of aluminium, fertiliser, iron, and steel facing reduced free allocation and rising export-market cost disadvantage, covering goods such as urea, ammonium nitrate, and ammonium sulphate for the fertiliser sector; this group was already eligible under the Commission's original December 2025 proposal
- Downstream operators using CBAM-covered goods as inputs, a category ENVI added in full, covering any EU manufacturer that buys steel, aluminium, or fertiliser as a raw material rather than producing it
- Other energy-intensive industries at continued risk of carbon leakage, carried over from the Commission's original proposal as a residual category
None of these categories can apply yet. The fund requires final adoption of the regulation before any application window opens, and no application process exists as of July 2026.
Legislative Status and What Happens Next
The Temporary Decarbonisation Fund is not law and carries no compliance obligation for importers or exporters as of July 2026. It sits at the committee-position stage of the ordinary legislative procedure, one step before Parliament's full plenary vote. The remaining sequence runs as follows.
- Parliament's plenary is expected to adopt its negotiating mandate on the TDF at the September 2026 session (September 14 to 17, Strasbourg)
- Trilogue negotiations between Parliament, the Council, and the Commission begin after the plenary vote
- The TDF trilogue runs alongside the related CBAM downstream scope-extension file (COM(2025)989, procedure 2025/0419(COD), rapporteur Mohammed Chahim), which ENVI also adopted its position on July 6, 2026, by 56 votes to 11, with 12 abstentions
- The Council adopted its general approach on the downstream-extension file on June 12, 2026, giving Council negotiators an existing mandate for that companion file heading into trilogue
The pairing of these two files matters. Because the TDF is designed as a compensating mechanism for the CBAM regime that the downstream-extension file also amends, negotiators are expected to settle both in the same trilogue track rather than in isolation. No confirmed date exists yet for a final agreement on either file; treat any 2027 support window as ENVI's negotiating position, not a settled fact, until Council and Parliament reach a joint text.
How the TDF Fits Into the Wider CBAM Revenue Picture
The TDF is one of two distinct uses proposed for CBAM certificate revenue, and the two should not be confused. Separately from the TDF, the European Commission's 2028-to-2034 EU budget proposal includes a plan to treat 75% of member states' CBAM certificate revenue as a new EU budget "own resource" from 2028 onward, with member states retaining the remainder. That own-resources proposal moves through a different legislative track tied to the EU's next multiannual financial framework and is, like the TDF, not yet adopted. The TDF proposal draws on the CBAM revenue that remains with member states rather than on the portion earmarked for the EU budget, though the exact revenue split has not been finalized in either process as of July 2026.
Is the Temporary Decarbonisation Fund the same as CBAM certificate revenue itself?
No. CBAM certificate revenue is the money importers pay when they surrender certificates under Regulation (EU) 2023/956. The TDF is a proposed spending mechanism that would use a portion of that revenue; the revenue exists independently of whether the TDF proposal becomes law.
When could EU producers first receive TDF payments?
Under ENVI's position, support would run from 2027 rather than the Commission's proposed 2028 start, but this depends on the regulation clearing plenary and trilogue first. No payment date is confirmed until Parliament and Council agree a final text, which is not expected before late 2026 at the earliest.