The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to ensure that imported goods face the same carbon costs as those produced in Europe.
As CBAM enters its next phase, the European Commission asked for input on three areas:
- Article 7 – Emissions reporting
- Article 31 – Adjustment to take account of free allocation
- Article 9 – Carbon prices paid in third countries
Sandbag responded to each consultation, highlighting risks that could weaken CBAM’s impact and offering practical solutions.
Our main recommendations
- Article 7 (Emissions reporting): Avoid resource shuffling by using induced emissions and systematic default values for steel, aluminium, cement, and electricity imports.
- Article 31 (adjustment for Free allocation): Move to product-based free allocation, ensuring equal treatment between EU and imported goods.
- Article 9 (Carbon price paid abroad): Ensure deductions only apply where carbon prices are paid for the production of goods, taking into account all support received by the production plant even not for carbon.
Related publications
CBAM impact on US trade: an analysis
Sandbag’s September 2025 research note explores the impact of the EU’s CBAM on US exports. It finds that even with expanded scope, the financial impact remains marginal — and US carbon pricing could turn net costs negative.
The EU CBAM: A Two-Way Street to Climate Integrity?
Sandbag’s latest report examines how the EU’s CBAM will impact third country exporters. While some may reduce costs through resource shuffling, real emissions may remain unchanged — calling for stronger alignment through carbon pricing.
Strengthening the CBAM — by default
Sandbag’s August 2025 brief calls for systemic default values to close CBAM loopholes—addressing scrap and cement circumvention, electricity imports, and indirect emissions.