The European Commission is reviewing whether more products should be brought into the scope of the Carbon Border Adjustment Mechanism (CBAM). Sandbag’s latest brief makes the case for expanding the CBAM to include organic chemicals, polymers, and refinery products — a significant gap in the current coverage. 

The objective of the CBAM is to prevent carbon leakage as free allocation under the EU ETS is phased out. While some key products like steel, aluminium and fertilisers are already covered, most chemicals remainexcluded — despite chemical plants and refineries accounting for about 30% of EU ETS industry emissions.  

This policy brief explains why including more chemicals in the CBAM is necessary, and how key value chains can be covered initially, with a phased and targeted expansion of coverage over time. 

• Free allocation under the EU ETS is not fit for purpose – it creates market distortions and discourages investment in low-emission alternatives. 

• The chemical and refinery sectors received 163 million free allowances in 2023, worth approximately €13 billion, yet the EU chemicals sector suggests carbon leakage is still taking place 

• CBAM inclusion would create a more level playing field with carbon-intensive imports while providing better incentives for reducing emissions in the EU 

• The complexity of the sector should not be considered an obstacle – initially the focus should be on including key value chains, with expansion of coverage over time 

• Starting with key basic organic chemicals, their downstream polymers and upstream refinery products would be the simplest approach that would enable the phase out of most free allocation, while preventing avenues for circumvention. 

Photo by Weerapong Khodsom from Getty Images

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May 22nd 2025

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