Extension of the CBAM scope

Author(s): Andrei Marcu, Michael Mehling, Aaron Cosbey, Laure Fleury 

The European Roundtable on Climate Change and Sustainable Transition (ERCST) has a history of engaging with the development and implications of carbon pricing mechanisms, including the EU Emissions Trading System (ETS) and the EU Carbon Border Adjustment Mechanism (CBAM). Previous work has explored various aspects of carbon leakage, competitiveness, and the design features necessary for effective policies.

Building on previous work conducted with Phases I (2019-2020), II (2020- 2021), III (2021-2022), IV (2023), and V (2024) of its project “Border Carbon Adjustments in the EU”, the ERCST has extended its analysis of the evolving CBAM into a sixth phase, providing decision-makers and stakeholders with a better understanding of critical issues as the CBAM proceeds from the transitional phase to the definitive phase from 1st January 2026.

Building on ERCST’s prior contribution to this discourse in the 2024 report “Including products further down the value chain in the EU CBAM”, this new paper offers a comprehensive analysis of the key considerations involved in broadening the CBAM scope horizontally to new sectors or vertically within covered ones.This paper examines the factors influencing such extension, including carbon leakage risk, administrative burden, complexity, competitiveness, and interdependence with EU ETS reforms, underscoring that CBAM and EU ETS are a single, interconnected package.