Solutions for exports of EU CBAM-covered goods

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

Introduced in July 2021, CBAM seeks to level the playing field for EU producers by imposing carbon costs on imports equivalent to those under the EU Emissions Trading System (ETS). However, it provides no mechanism to address the carbon cost disadvantages faced by EU exporters competing in global markets, where rivals often operate without comparable carbon pricing. This omission threatens the economic viability of export-dependent industries and risks exacerbating global emissions through export-related carbon leakage.

Simultaneously, 2025 marks a pivotal year for the CBAM, with pending reviews, implementing acts, and delegated acts under the Omnibus 2025 EU framework set to finalize its design before its definitive phase in 2026. These decisions will determine whether CBAM can effectively balance climate goals with safeguarding EU industrial resilience.

This work laid a foundation for further analysis, culminating in the 2024 report, “Review of Carbon Leakage Risks of CBAM Export Goods,” which evaluated the exposure of EU exports in CBAM sectors to carbon leakage risks. This later report underscored the economic and environmental significance of exports, advocating for a dynamic and sector-specific review process to assess leakage risks, distinct from standard EU ETS reporting.

This report revisits and expands upon previous work considering recent developments, such as the escalating industrial viability crisis and the critical 2025 CBAM decision process. It offers a comprehensive analysis of the CBAM’s limitations, particularly its neglect of exports, which risks significant loss of market share for EU producers and increased global emissions through carbon leakage, underscoring the urgent need for action. It examines practical challenges, explores potential policy adjustments and evaluates design options for an effective export mechanism. Additionally, it assesses compliance with international trade standards, considering the evolving geopolitical landscape and WTO implications.

The report concludes with actionable recommendations to guide policymakers in integrating export provisions into CBAM, ensuring a balanced approach between climate ambition and industrial competitiveness.