Week Ahead (28 September)

Monday, 28 September – ITRE discusses industry-friendly ETS position as Parliament debate develops

Later today, the European Parliament's Industry and Energy Committee (ITRE) will discuss its draft opinion on the EU ETS, providing a further indication of the balance emerging within Parliament between tightening the system after 2030 and limiting its impact on European industrial competitiveness. Juri Ratas (EPP, Estonia), ITRE's lead MEP on the file, will present his proposals to committee members, with the subsequent amendment process providing an early test of support for his relatively industry-friendly approach.

ITRE is an opinion-giving committee rather than the lead committee on the review. ENVI retains responsibility for the legislation under rapporteur Peter Liese (EPP), who has already presented his own draft report. ITRE's eventual position will therefore feed into ENVI's work rather than provide a competing parliamentary report, making the key question how much of Ratas's approach ultimately influences Liese's compromises and Parliament's final position. 

For EUA markets, the most relevant differences concern allowance supply and industrial safeguards. Ratas proposes a Linear Reduction Factor (LRF), the annual rate at which the ETS emissions cap is reduced, of 3.2% for 2031–35 and 2.2% thereafter, compared with Liese's 3.4%/2.3% and the Commission's 3.7%/1.7%, implying greater allowance availability during the first half of the 2030s. He would also remove the Commission's proposed 80/20 investment conditionality for free allocation, introduce safeguards allowing the phase-out of free allowances alongside CBAM to be halted or partially reversed if European industrial competitiveness deteriorates, and make the full proposed 260 million international credits available during 2036–40.

Today’s discussion should consequently provide an early indication of how much support exists within ITRE for going further than Liese in softening the ETS trajectory for industry. Ratas's draft remains only the committee's starting position and could change materially through amendments, but the debate is relevant to the broader direction of travel in Parliament. The next step will be the amendment process within ITRE and its eventual vote, after which the adopted opinion will feed into ENVI's work on Liese's report.

Wednesday, 30 September – IAA negotiations resume as German and Spanish proposals point towards possible landing zone on UK eligibility

On Wednesday, member states will resume negotiations on the Industrial Accelerator Act (IAA), with the treatment of third-country content under the proposed “Made in Europe” requirements remaining a key issue. The Working Party on Competitiveness and Growth meets again following last week's Competitiveness Council, where ministers took stock of the negotiations rather than reaching the political agreement initially envisaged by the Irish Presidency, reflecting continued differences over the scope of European preference.

The talks will also come a week after UK Prime Minister Andy Burnham raised the issue directly with Commission President Ursula von der Leyen in New York. London has warned that excluding British inputs could damage highly integrated UK-EU supply chains, particularly in automotive and steel, and is seeking assurances that the eventual rules will avoid what Burnham described as “collateral damage”. The issue has therefore become an increasingly important component of the wider UK-EU reset ahead of the next bilateral summit, which remains targeted for around the end of November but could slip into December. 

Importantly, the Council discussions now have potentially clearer routes towards a compromise. Germany is proposing that countries covered by the WTO Government Procurement Agreement, an EU free-trade agreement or a customs union should in principle receive treatment equivalent to EU-origin content, subject to reciprocity and safeguards against circumvention. The UK would qualify through both the GPA and the EU-UK Trade and Cooperation Agreement. Spain, meanwhile, is advocating a more differentiated tiered system under which treatment would depend on the partner country's relationship with the EU and potentially vary across sectors and components. While the approaches differ, both move the debate away from a binary ‘’EU vs non-EU'’ distinction and could provide the basis for a landing zone between governments favouring a restrictive European preference (led by France) and those seeking greater openness towards established partners.

Wednesday's discussions will therefore provide an early indication of how much support these approaches attract and whether the Presidency can begin translating them into a workable compromise. For the UK, the immediate objective remains a sufficiently credible political assurance that British industry can ultimately qualify rather than definitive legal inclusion at this stage. Even if Council governments converge over the coming months, the IAA must still pass through the European Parliament and subsequent trilogue negotiations. A final agreement therefore remains more likely in early 2027, making it difficult for London to secure a legally settled outcome before the UK-EU summit.

Wednesday, 30 September – Commission to unveil long-delayed pre-enlargement review ahead of October leaders’ debate

The European Commission is expected to present its long awaited pre-enlargement policy review on Wednesday, setting out how the EU's institutions, decision-making, budget and policies should adapt ahead of the next enlargement. The review, originally promised much earlier in the Commission's mandate, will feed directly into the 15–16 October European Council, where leaders are expected to hold a strategic discussion on enlargement and the internal reforms required to prepare the Union for additional members.

According to a draft of the Commission communication, Brussels is expected to argue that enlargement does not require a fundamental redesign of the EU, with most existing policies and institutional arrangements considered capable of accommodating additional members. Instead, the Commission proposes targeted reforms largely within the existing Treaties. More specifically:

• Decision making is likely to prove the most politically sensitive element. The draft calls for greater use of qualified-majority voting, including through existing passerelle clauses in areas such as foreign policy and sanctions, and proposes ending the Council's informal practice of requiring unanimity for intermediate steps in accession negotiations, such as opening and closing negotiating chapters. Final accession decisions would continue to require unanimity. More controversially, future members could be asked to make a temporary commitment not to block decisions requiring unanimity during their first years of membership, including decisions concerning subsequent enlargements.

• The Commission also envisages stronger safeguards against post-accession backsliding. Existing economic, Single Market and justice safeguards could be extended from three to potentially ten years, while new financial and institutional safeguards could allow action where rule of law deficiencies threaten EU funds or where a new member seriously breaches EU values.

• A third strand would significantly expand gradual integration before full membership, particularly in defence and security, industrial policy, critical technologies, financial integration, energy, emissions trading and infrastructure. The draft explicitly distinguishes between the frontrunners, stating that for Montenegro and Albania the priority remains completing accession negotiations, while other candidates could make greater use of progressive integration while reforms continue.

These proposals are partly intended to address concerns among enlargement-sceptical governments that future accessions could reproduce some of the difficulties experienced with Hungary under Viktor Orban, where unanimity requirements have repeatedly allowed a single member state to delay or condition EU decisions, while existing mechanisms for addressing rule of law backsliding have proved insufficient.

Wednesday's publication will therefore move the debate increasingly from whether candidate countries are ready for membership towards whether the EU itself is institutionally and financially prepared to enlarge. This will feed directly into the 15-16 October European Council, where leaders are also expected to discuss the next €2 trillion MFF. The two debates are closely connected as the Commission's draft already incorporates an enlargement revision clause into the proposed 2028–34 budget, while identifying agriculture and cohesion as areas where the eventual financial impact will depend heavily on which countries join and when.

Friday, 2 October – September inflation data to provide first major test of ECB outlook following rate hike

On Friday, Eurostat will publish its flash estimate for September euro area inflation, providing the first major inflation reading since the ECB resumed monetary tightening earlier this month. The data will be provide greater evidence of whether the renewed energy shock is keeping headline inflation elevated and whether higher energy costs are beginning to spread more materially into other components of the inflation basket.

As a reminder, the ECB raised its three key interest rates by 25 basis points on 10 September, taking the deposit rate to 2.50%, after pausing in July. The decision followed a renewed acceleration in inflation, with the August inflation (annual) reaching 3.2%, up from 2.9% in July, largely because energy inflation jumped to 14.3%. 

The September release will therefore be particularly relevant ahead of the ECB's next monetary policy meeting on 29 October. The ECB's latest baseline forecasts see inflation averaging 3.0% this year, 2.5% in 2027 and 2.1% in 2028, but policymakers have stressed that the outlook remains unusually dependent on the duration and severity of the Middle East energy shock. President Christine Lagarde has also pushed back against expectations that higher energy prices will automatically translate into a series of additional rate increases, emphasising that the Governing Council will continue to assess incoming data on a meeting-by-meeting basis.

However, recent developments suggest that the energy shock could prove more persistent than initially anticipated. ECB Chief Economist Philip Lane warned earlier last week that a second wave of higher oil and gas prices could keep inflation elevated for longer, with a return towards the 2% target now expected only from around mid-2027. While there has so far been limited evidence of broader second-round effects, Lane noted that higher energy costs could increasingly feed into food, electricity and goods prices later this year. 

Friday's figures will consequently matter less for whether inflation remains above target, which is already largely priced in, than for its composition and the extent of any pass through beyond energy. A further acceleration in headline inflation accompanied by firmer underlying price pressures would strengthen the case for additional tightening later this year, whereas continued stability in core and services inflation would support the ECB's argument that the current shock can still be treated more cautiously.