Denmark will guarantee a loan to the Danish subsidiary of Fire Point, the Ukrainian maker of Flamingo cruise missiles, the Danish Business Ministry announced on 21 October. The financing will run through EIFO, Denmark’s state export and investment fund.
Ukraine uses its Flamingo missiles to strike defense plants deep inside Russia as Moscow continues its full-scale invasion. Fire Point broke ground in December 2025 on a plant in Vojens, southern Denmark, to make solid fuel for the missiles. The project has since grown far more expensive. In August, CEO Iryna Terekh said its estimated cost had risen from €50 million to above €150 million, calling the figure “very rough.” The war, meanwhile, stands in the way of Fire Point borrowing on ordinary terms in Denmark, the ministry said. That is why the Danish state is guaranteeing the loan.
The guarantee covers 750 million Danish kroner, or about $112.6 million, Reuters reported. Terekh said in August that the plant’s launch had slipped to late 2027. The ministry called the deal another big step toward starting production. However, Ukrainian outlet Defender Media noted that the statement does not say directly that the loan will fund the plant.
EIFO chief Peder Lundquist said the fund is involved in nearly 40 projects linked to Ukraine. Business Minister Martin Lidegaard said hosting a Ukrainian defense company brings Denmark knowledge, production, and partnerships. Europe’s security and freedom, he added, start in Ukraine.
Defense Minister Jeppe Bruus said Denmark was the first country to decide to let a Ukrainian defense company set up on its soil. Production outside Ukraine, he argued, is better protected from Russian attacks. He added that Fire Point’s presence opens cooperation that could give Denmark access to technologies developed in wartime.
Denmark first said in September 2025 that Fire Point would make long-range missile fuel on Danish soil. Since then, the company has signed deals with more than a dozen European firms for FREYJA, an anti-ballistic project. It could reduce Europe’s long-term reliance on scarce US-made Patriot interceptors. Fire Point aims for a first ballistic missile intercept with it by mid-2027.
The agreement, reached by the Council and European Parliament on 20th October and announced the following day, raises the invalidation threshold of the EU Emissions Trading System’s market stability reserve from 400 million to 700 million allowances.
The compromise reached by EU negotiators follows months of pressure from energy-intensive industries concerned about carbon prices, electricity costs and competition from manufacturers operating under less restrictive environmental regimes.
The measure requires formal approval before entering into force and forms part of a wider review of the EU’s principal carbon-pricing mechanism.
Established in 2019, the market stability reserve was designed to address the accumulation of surplus emissions allowances that had weakened the effectiveness of Europe’s carbon market.
Under the Emissions Trading System, companies in covered sectors must surrender allowances corresponding to their greenhouse gas emissions. The total quantity available is progressively reduced, creating a financial incentive to cut emissions.
The reserve adjusts the supply of allowances entering the market, withdrawing them when there is a substantial surplus and releasing them under specified conditions when supply becomes scarce.
Existing rules also provide for the permanent cancellation of allowances held above a threshold of 400 million.
Under the new agreement, that threshold would increase to 700 million, allowing a larger stock to remain available for potential future release.
The change does not automatically introduce 300 million additional allowances into circulation. Releases would continue to depend on the reserve’s operating rules and market conditions.
According to the Council, more than three billion allowances have been invalidated since the mechanism began operating in 2023.
The Commission initially proposed ending automatic invalidation indefinitely, while the Council’s September negotiating position envisaged a temporary suspension followed by a higher threshold.
The compromise retains invalidation but increases the amount protected from cancellation.
The agreement follows growing concern about the cumulative cost of European climate regulation, particularly for steelmaking, chemicals, cement and other energy-intensive sectors. Manufacturers have warned that carbon costs, combined with relatively expensive electricity and industrial gas, complicate investment decisions and weaken their ability to compete internationally.
Brussels must also consider the consequences of production shifting to jurisdictions with lower emissions-related costs, a phenomenon known as carbon leakage. Earlier this year, EU Today examined the Commission’s consideration of changes to industrial protections under the ETS, including the relationship between free allowances and the Carbon Border Adjustment Mechanism.
The latest reserve agreement does not directly change the allocation of free allowances, the emissions cap or the obligations imposed on individual industrial installations. Its principal effect would be to preserve a larger buffer that could become available if future market conditions trigger the release mechanism.
For manufacturers planning investments extending into the 2030s, the availability of allowances and the future trajectory of carbon prices influence production costs and the commercial case for decarbonisation technologies.
The European Commission reported in May that the total number of allowances in circulation during 2025 stood at approximately 1.023 billion.
Its annual market stability reserve calculation provided for approximately 190.5 million allowances to be withdrawn from auctions between September 2026 and August 2027.
These withdrawals reflect the existing mechanism for reducing market surpluses. The proposed higher invalidation threshold concerns how many allowances can subsequently remain in reserve rather than being cancelled.
The overall emissions cap will continue to decline under the legislation already governing the ETS.
Consequently, preserving a larger reserve does not remove the long-term constraint on emissions or guarantee lower carbon prices for European industry.
The agreement also concerns the established ETS covering power generation, industry and certain other sectors, rather than the separate ETS2 regime for emissions associated with road transport and buildings.
The latter has generated its own political controversy, as EU Today reported following the October European Council summit.
The Council and Parliament have agreed that the question of gradually reducing the invalidation threshold should be considered during the broader ETS review.
That exercise will address the carbon market’s operation over a longer period, when the declining supply of allowances could create tighter conditions.
The present agreement therefore provides an adjustment to the reserve mechanism without reopening the entire emissions trading framework. Following legal and technical finalisation, the provisional deal must be endorsed by both institutions and formally adopted.
The new 700 million threshold would apply after the legislation takes effect, while the larger review of the ETS continues through the EU legislative process.
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