European industry appears poised to reap a more generous share of free pollution allowances than first expected after pursuading policymakers that proposed legislation would impose steep costs on manufacturers and threaten jobs.

Germany, in particular, has led an effort to ensure that manufacturers - including those in chemicals, glass, steel and cement - receive free allocations if they are forced to compete against companies from non-EU countries that are not subject to new regulations, according to people familiar with the negotiations.