Week Ahead (12 October)

Monday, 12 October – Environment Council to test support for ETS flexibility as Italy and Czechia push for stronger intervention

EU environment ministers will discuss the ongoing Emissions Trading System (ETS) review today, providing the first major political test of the growing pressure for greater industrial flexibility. Following two further Working Party meetings on 5 and 7 October, the Irish Presidency is seeking ministerial guidance on three particularly divisive issues: the post-2030 Linear Reduction Factor (LRF), the use of international carbon credits and the conditions attached to continued free allocation. The Presidency intends to use the discussion to prepare its first compromise text later in October, with a Council General Approach still targeted for early December.

The negotiations have become increasingly divided between governments seeking relief from high carbon costs, notably Italy, Poland and Czechia, and those more concerned about preserving the ETS's long term scarcity signal, including the Netherlands and Nordic countries. France remains the principal swing state, reflecting divisions between its industrial and climate policy priorities, while Germany appears more inclined to preserve the underlying ETS architecture while accepting targeted adjustments.

The pressure for intervention has intensified following a 29 September joint Italian-Czech paper calling for more immediate changes to allowance supply. Most notably, Rome and Prague propose temporarily reducing or suspending intake into the Market Stability Reserve (MSR), pointing to approximately 190 million allowances scheduled for withdrawal from auctions between September 2026 and August 2027. They also suggest allowing extraordinary releases from the reserve under adverse market conditions, alongside greater free allocation flexibility and a possible pause in the CBAM-related phase out. These proposals go beyond the Council's September agreement to suspend permanent MSR allowance invalidation until 2030, which does not itself increase near-term market supply.

Nevertheless, the base case points towards a recalibration rather than a fundamental weakening of the ETS. Greater flexibility around free allocation conditionality and industrial investment support through the proposed EU ETS Investment Booster appears more achievable than substantial changes to the emissions cap or direct intervention in allowance prices. There is also negotiating room around the LRF and its interaction with international credits, although no clear majority has emerged for significantly weakening the Commission's proposed trajectory. Discussions on strengthening the Article 29a excessive price mechanism have likewise yet to produce a common Council position.

Today's meeting is therefore primarily a political watchpoint rather than a decision point. Particular attention will fall on whether France and Germany move closer to the interventionist camp and whether Italy and Czechia succeed in building support for changes to near term EUA supply. The debate could also feed into the 15–16 October European Council, where industrial energy costs and competitiveness may generate further pressure for ETS adjustments. However, the first Irish Presidency compromise text, expected later in October, will provide the clearest indication of which proposals have sufficient support to advance.

Tuesday, 13 October – Kimberly-Clark/Kenvue expected to secure Phase I clearance, following EU remedy review

The European Commission faces a 13 October deadline to decide on Kimberly-Clark's proposed acquisition of Kenvue, with conditional Phase I clearance now appearing highly likely following the submission and market testing of remedies. Kimberly-Clark formally offered commitments last month, extending the original 29 September deadline by 10 working days and allowing DG COMP additional time to assess whether the proposed concessions sufficiently address the competition concerns identified during its initial investigation.

As previously highlighted, the approximately $40 billion transaction would combine Kimberly-Clark's consumer brands, including Huggies and Kleenex, with Kenvue's healthcare portfolio, which includes Listerine, Neutrogena and Aveeno. The principal competition concerns appear concentrated in feminine hygiene products, where Kimberly-Clark's Kotex competes with Kenvue's Carefree and Stayfree brands. Although the Commission has not disclosed the proposed commitments, targeted divestments remain the most likely solution, consistent with Australia's conditional clearance requiring the disposal of the Carefree and Stayfree businesses. The separate Foreign Subsidies Regulation review has already concluded without presenting a significant obstacle.

Importantly, the Commission's market testing of the remedy package concluded around 2–3 October, providing DG COMP with time to evaluate feedback from customers and competitors. We understand that the parties would likely have received indications by now if the proposed commitments were considered insufficient. In the absence of any reported objections requiring substantial revisions, our base case is that the transaction will receive conditional Phase I clearance by Tuesday rather than proceed to an in-depth investigation.

The case also illustrates DG COMP's increasing use of extensive pre-notification engagement and Phase I commitments to resolve relatively contained horizontal overlaps. Unlike transactions such as Mars/Kellanova when DG COMP ultimately granted a conditional approval following a Phase II probe, there has been little indication of a wider portfolio or retailer bargaining theory of harm. The remaining question is therefore less whether the transaction can secure approval than the precise scope of the remedies the Commission ultimately accepts, although formal clearance remains pending.

Thursday, 15 October – Friday, 16 October – EU leaders to tackle competitiveness, energy costs and defence as pressure builds for policy adjustments

EU leaders will meet in Brussels on 15–16 October for a European Council focused on competitiveness, energy security, Ukraine and European defence, alongside discussions on the next EU budget (MFF), migration and enlargement. The 5 October draft conclusions place competitiveness at the top of the agenda, reflecting growing concern over industrial costs, external dependencies and geopolitical disruptions. The summit will also provide an opportunity to assess the EU's increasingly difficult trade relationship with China following Trade Commissioner Maros Sefcovic's visit to Beijing on 8–9 October, which concluded with Beijing announcing an understanding with the EU on hybrid vehicle trade.

China is therefore likely to feature in the wider competitiveness discussion, even though the draft conclusions contain no dedicated China section. On Friday, China's Commerce Ministry announced an understanding on hybrid vehicle trade, consistent with WTO rules, following Sefcovic's meetings with Commerce Minister Wang Wentao and Vice Premier He Lifeng. According to diplomatic accounts following the Commission's briefing to EU ambassadors on Sunday, Brussels is preparing safeguards from 1 December that would effectively limit Chinese hybrid vehicle imports to 350,000 units in the first full year, with the ceiling rising by 6% annually. The arrangement follows months of negotiations aimed at addressing the EU's growing trade imbalance with China, particularly the rapid expansion of Chinese plug-in hybrid exports. The talks also reportedly yielded progress on rare-earth export licences, European medical device market access and restrictions affecting EU meat and livestock exports. However, the precise terms and implementation remain unclear, while the Commission continues developing broader initiatives to diversify critical supply chains.

Energy affordability and industrial competitiveness will be another focus. Although the draft conclusions do not explicitly endorse changes to ETS allowance supply, the summit follows the 12 October Environment Council, where Italy and Czechia have been pushing for greater flexibility. Leaders could therefore provide further political direction on industrial carbon costs and energy affordability. The key question is whether the discussion produces concrete instructions or remains focused on general competitiveness objectives. 

Ukraine and European defence also feature prominently. Leaders are expected to reaffirm financial and military support for Kyiv, including the €90 billion Ukraine Support Loan, while discussing air defence, energy infrastructure and defence-industrial cooperation. They will also review progress towards the EU's 2030 defence readiness objectives, drawing on the first annual assessment prepared by the European Defence Agency (EDA). The draft calls for agreement on the military mobility proposal before year-end and anticipates further Commission initiatives on defence procurement.

The next Multiannual Financial Framework (MFF) will be discussed amid significant differences over spending priorities. The Irish Presidency's latest proposal reduces the Commission's proposed budget by €159 billion in current prices, prompting Commission objections over cuts to crisis-response funding. However, Germany and other fiscally conservative governments are reportedly seeking further reductions, underlining the gap between negotiating positions. The draft nevertheless envisages agreement by the end of 2026. Leaders will also address migration, the Middle East and enlargement, including preparations for Montenegro's accession treaty and efforts to close its remaining negotiating chapters by year-end.

The principal watchpoints will be how leaders assess the emerging arrangement with China, particularly its scope and implementation, and whether they provide more specific political guidance on energy costs and industrial competitiveness. The MFF discussion will also test whether the Irish Presidency's revised proposal can narrow divisions over the next EU budget. However, major policy decisions are more likely to emerge through subsequent negotiations and Commission initiatives than from the summit itself.

Thursday, 15 October – Advocate General Biondi to deliver opinion on ByteDance's appeal against TikTok's DMA gatekeeper designation

On Thursday, Advocate General Andrea Biondi is expected to deliver his opinion in Case C-627/24 P, concerning ByteDance's appeal against the General Court's decision to uphold TikTok's designation as a gatekeeper under the Digital Markets Act (DMA). The opinion will provide an important indication of how the Court of Justice of the European Union (CJEU) may approach one of the earliest legal challenges to the Commission's application of the DMA's gatekeeper criteria.

As previously reported, the General Court dismissed ByteDance's initial challenge in July 2024, largely endorsing the Commission's September 2023 decision to include TikTok among the first six designated gatekeepers. ByteDance had argued that, despite exceeding the DMA's quantitative thresholds, TikTok remained a challenger platform rather than an entrenched intermediary. The General Court nevertheless concluded that ByteDance's financial resources, TikTok's rapid growth and its substantial European user base justified the designation. Although it identified certain errors in the Commission's assessment, it found that these did not affect the legality of the decision.

Following a hearing in May 2026, the appeal now centres on whether the General Court correctly interpreted Articles 3(1) and 3(5) of the DMA, particularly the ability of companies to rebut the presumption of gatekeeper status arising from the regulation's quantitative thresholds. ByteDance argues that the lower court effectively made those presumptions almost impossible to challenge and failed to give sufficient weight to evidence that TikTok does not occupy the entrenched position of an important gateway between business users and consumers.

Biondi's opinion will be closely watched for its interpretation of the evidentiary standard required to rebut a gatekeeper designation. A restrictive interpretation would reinforce the Commission's discretion when applying the DMA's designation framework, while a more demanding standard could strengthen the position of companies seeking to challenge their inclusion. Although the Advocate General's opinion is not legally binding, it usually tends to decisively shape the Court's eventual approach. The CJEU's final judgement is expected in the coming months and could have implications beyond TikTok, given the wider litigation surrounding the DMA's gatekeeper designations.