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 DRI loophole requires new free allocation reform
We took part in a targeted survey run by the European Commission’s DG TAXUD on methodologies used to calculate embedded emissions and the rules for adjusting CBAM obligations alongside free allocation under the ETS. Our proposal: free allocation should be reformed to close the ‘DRI loophole’.
Closing the CBAM scrap loophole – A critical move for climate & competitiveness
This joint op-ed by Norsk Hydro, Alcoa, Bellona Europe and Sandbag was published by Carbon Pulse....
A Scrap Game: Impacts of the EU Carbon Border Adjustment Mechanism
Currently, we are in the CBAM transitional period, with negotiations ongoing for its full implementation in January 2026. Learn about the legislative process and the effect of this policy on the EU’s main trade partners, especially China.