Today, the European Commission published a series of Carbon Border Adjustment Mechanism
(CBAM)-related documents including two legislative proposals and key secondary legislation for its implementation.  

Bellona’s key messages: 

• Downstream and anti-circumvention: Expanding CBAM to downstream sectors based on principles such as carbon-leakage risk, carbon intensity and technical feasibility is appropriate. Closing the scrap loophole is an important step for the instrument’s effectiveness. However, the potential inclusion of international credits could undermine CBAM’s core objectives at the international level. Allowing the use of carbon credits is concerning as it risks  reducing incentives to develop carbon pricing systems in third countries, which in turn will weaken the signal to decarbonise their economies. 

• Temporary Decarbonisation Fund: While the fund’s focus on decarbonisation is a positive step, the delaying of a definitive approach until the ETS review might open the door to export protection through free allowances, which risks undermining the integrity of the EU ETS as a tool for industrial decarbonisation. 

• Indirect emissions: The Commission must set a clear pathway for the inclusion of indirect emissions across sectors through a reform of Indirect Cost Compensation (ICC) distribution, yet the Commission’s timeline currently delays this until after 2028. 

Context 

CBAM has a vital role in effectively pricing carbon within the EU while safeguarding European industries from carbon leakage and drive cleaner production abroad, reinforcing global climate action. With today’s publications, the missing pieces are now in place for the CBAM’s full rollout. The methodology for the definitive period foresees high default values to protect EU producers. The proposals on expansion to downstream sector, anti-circumvention measures and export solutions address gaps raised by European industry, leaving it to the co-legislators to fine-tune the mechanism for both effectiveness and climate compatibility.