Sandbag welcomes the Circular Economy Act (CEA) as an important step to accelerate the transition to a circular economy in the EU. Progress in this area has been slow and this act is sorely needed to address systemic issues holding back circularity, including the current fragmented approaches across Member States.
The Carbon Border Adjustment Mechanism CBAM is often misunderstood as a trade policy whereas it is actually a climate policy. Its only objective, as stated in Article 1 of the CBAM Regulation, is to replace the current system of free allocation of emission allowances to EU-based manufacturers under the EU carbon market.
This free allocation system has been in place for industrial processes ever since the market started in 2005 and has led to stagnating emission intensity levels for EU industry. For example, the emission intensity of the EU steel sector has practically not changed in the last 18 years!
We agree with the European Commission’s general diagnosis that increasing the share of electricity in overall energy consumption is necessary to achieve deep decarbonisation. However, it is not sufficient. If overall energy use increases, or if electricity generation does not decarbonise rapidly, then electrification may fail its decarbonisation role.
Sandbag has submitted responses to the EU’s CBAM calls for evidence, addressing emissions reporting, adjustment for free allocation, and carbon prices paid abroad. We highlight risks such as loopholes and unequal treatment, and propose practical solutions to strengthen CBAM’s effectiveness and fairness.
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.