Carbon Border Adjustment Mechanism (CBAM)
We advocate for a strong CBAM to phase out the allocation of free emission allowances, address carbon leakage, and accelerate global climate action.
About the CBAM
A carbon policy to prevent carbon leakage
- Carbon leakage is the re-location of emission intensive production from Europe to regions with no carbon pricing or less stringent climate regulations.
- To address carbon leakage, the EU allocates free emission “permits” – also known as “allowances” – to emission-intensive EU industries.
- This free allocation system strongly reduces decarbonisation incentives in the EU.
- The CBAM was created to replace free allocation, thereby unleashing the potential to decarbonise EU industries.
- The CBAM puts a price on greenhouse gases emitted during the production of a list of imported goods, to level the playing field between EU and non-EU industries.
- As the free allocation of emission allowances is phased out, CBAM is phased in, ensuring fair competition and avoiding carbon leakage while setting the right incentives for EU industries
Implementation timeline
- Adoption – 17 May 2023
- Transitional phase – 1 October 2023 – 31 December 2025: A pilot period to gather data on embedded emissions and refine methodologies.
- Start of definitive period – January 2026: Importers must submit yearly reports on imported goods and their verified emissions.
- CBAM gradually replaces free allocation – January 2026 to 2034: Free allocation will be gradually replaced by the CBAM.
Estimated Phase-Out of Free EU Carbon Allowances (2026–2034) in million tonnes CO₂.
Our work
Researching ways to address the CBAM’s weaknesses
For many years, we’ve been conducting research on:
- Emissions and products covered by the CBAM.
- The impact of the CBAM on trade and competitiveness.
- Reporting requirements and methodologies under the CBAM
Advocating for our solutions
As members of the European Commission’s CBAM Expert Group, we provide evidence-based recommendations to enhance the policy’s effectiveness.
Informing and framing the debate
We share our insights and advocate for improvements, in Europe and beyond, by participating in public events. Recent contributions included:
- 𝗦𝗵𝗮𝗻𝗴𝗵𝗮𝗶 𝗱𝗶𝗮𝗹𝗼𝗴𝘂𝗲 𝗼𝗻 𝗽𝗿𝗲𝘀𝘀𝗶𝗻g energy 𝗮𝗻𝗱 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗶𝘀𝘀𝘂𝗲𝘀, as part of China International Import Expo
- High-level conference on CBAM organised by DG Trésor
- High-level conference on the CID organised by France’s Permanent Representation
Latest publications on CBAM
Our achievements
December 17 2025: Sandbag analysis cited in the European Commission’s CBAM impact assessment
Sandbag analysis was cited in the European Commission’s CBAM impact assessment published on 17 December 2025. The assessment explicitly recognises risks of CBAM circumvention and reflects policy options Sandbag developed on extending CBAM coverage to uncompensated indirect emissions and downstream goods.
Sandbag’s analysis is cited in the Commission’s impact assessment at the following locations:
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Impact Assessment – Part 1:
pp. 7 and 14
https://taxation-customs.ec.europa.eu/document/download/71d4f753-4a2d-4367-bb10-c1967cb7f28d_en?filename=SWD_2025_988_1_EN_impact_assessment_part1_v4.pdf -
Impact Assessment – Part 2 :
p. 6
https://taxation-customs.ec.europa.eu/document/download/61b0d225-8b3f-42e0-996a-58c228a4bae7_en?filename=SWD_2025_988_1_EN_impact_assessment_part2_v4.pdf
These policy options were set out in Sandbag’s response to the Commission’s public consultation on CBAM reform, published as Strengthening the CBAM by default (August 2025):
December 16 2025: Commission CBAM review reflects Sandbag proposal on uncompensated indirect emissions
In its review of the Carbon Border Adjustment Mechanism published in December 2025, the European Commission sets out technical options to extend CBAM coverage to indirect emissions.
The review considers an option to cover only the share of indirect emissions not compensated under existing electricity compensation schemes, including by using Member State data on actual compensation payments to calculate the uncompensated share (p.48). This approach reflects a proposal developed by Sandbag during the CBAM review process.
Sandbag set out this proposal in its analysis on extending CBAM to indirect emissions, submitted to the Commission earlier in 2025.
Read Sandbag’s analysis:
https://sandbag.be/2025/08/01/why-the-cbam-should-cover-indirect-emissions/
Read the European Commission’s CBAM Review Report:
https://taxation-customs.ec.europa.eu/document/download/3903da9d-44fd-4508-8915-f27ef25fe033_en?filename=Review%20Report_0.pdf
2025: Our warning on post-consumer scrap in the CBAM was initially dismissed but later adopted by European Aluminium
Sandbag consistently warned that excluding embedded emissions from post-consumer scrap under the CBAM would undermine the mechanism’s integrity by enabling circumvention through resource shuffling.
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February 2023 – Sandbag warned that assuming zero embedded emissions for scrap creates incentives to game the CBAM, allowing exporters to strategically divert scrap to EU-bound products without reducing emissions (“Mind the Scrap: Ignoring Embedded Emissions Puts the CBAM at Risk”).
Read it here -
2023 – Sandbag raised these concerns in discussions with the CBAM Expert Group, where the risks linked to post-consumer scrap were initially dismissed by parts of industry.
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May 2025 – Sandbag reiterated that the CBAM must be strengthened to prevent circumvention by expanding its scope vertically (to cover key precursors) and horizontally (to cover remaining ETS sectors), explicitly highlighting remaining emissions gaps linked to scrap.
Read it here -
August 2025 – Sandbag detailed how the CBAM’s default emissions reporting method enables circumvention, as steel and aluminium scrap is still treated as having no embedded emissions. This allows exporters to reduce CBAM fees through strategic scrap blending, without delivering real emissions reductions (“Strengthening the CBAM — by default”).
Read it here -
By late 2025, European Aluminium publicly acknowledged the risks associated with post-consumer scrap under the CBAM, aligning with Sandbag’s long-standing position that embedded emissions in scrap must be addressed to safeguard the mechanism against circumvention.
2025: Indian international media relayed Sandbag’s analysis on limited CBAM impacts
Indian international media — typically among the most critical of the EU Carbon Border Adjustment Mechanism (CBAM) — relayed Sandbag’s analysis highlighting that the initial financial impact of the CBAM on Indian exports is likely to be limited.
This coverage helped rebalance public debate by countering narratives portraying the CBAM as a punitive trade measure, and more accurately as a climate tool.
Sandbag’s findings were cited by several major Indian outlets, including:
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Business Today (India), 17 October 2025
EU’s carbon border fees on Indian exports likely to be minor initially
Read it -
The Hunt (India), 20 October 2025
Relief for India on carbon border tax; initial financial impact limited, but uncertainty remains
Read it -
Indian PSU (India), 20 October 2025
EU’s Carbon Border Fees on Indian Exports Likely to Be Minor Initially: Sandbag Study
Read it
September 2024: Sandbag's CBAM findings on the “scrap loophole” taken up in the Draghi report (2024)
Sandbag’s findings on the CBAM “scrap loophole” — highlighting how the zero-emissions assumption for recycled materials could incentivise circumvention — were relayed in Mario Draghi’s report on European competitiveness (September 2024).
This concern had been raised consistently by Sandbag and was set out in our June 2024 report A Scrap Game: Impacts of the EU Carbon Border Adjustment Mechanism.
Relevant documents:
- Sandbag report – A Scrap Game: Impacts of the EU Carbon Border Adjustment Mechanism (June 2024)
https://sandbag.be/2024/06/03/a-scrap-game/
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Draghi report, Part A – A competitiveness strategy for Europe
https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en -
Draghi report, Part B – In-depth analysis and recommendations
https://commission.europa.eu/document/download/ec1409c1-d4b4-4882-8bdd-3519f86bbb92_en
Our messages
The CBAM is an important climate policy that enables the phase out of free allocation under the EU ETS. Our proposals aim to make the CBAM effective at meeting this objective.
Getting the pricing mechanism right
Including indirect emissions into the CBAM.
Including emissions from inputs such as coke, lime, pre-bake anode.
Avoiding circumvention incentives through e.g. resource shuffling
eg. Attributing emissions to aluminium and steel scrap.
Encouraging the use of default values by our trade partners.
Mitigating circulation of carbon price paid in third country.
Simplifying the system
Increasing the minimum intrinsic value (currently 150 EUR per consignment).
Limiting the inclusion of additional downstream products unless absolutely necessary.
Making the use of default values more systematic.
Read our analysis and policy recommendations
The CBAM dividend for Namibia and Ghana
This research note shows that Namibia and Ghana are likely to benefit from the CBAM, as EU price increases linked to the EU ETS outweigh CBAM fees under current exports. It also sets out transparent transformation scenarios, based on announced industrial projects, to show how expanded and lower-emissions production could further increase export revenues over time.
Chemicals in the CBAM: Time to step up
Sandbag’s latest brief explains why the EU CBAM must be expanded to cover key chemical value chains. With chemicals and refinery products responsible for 30% of industry emissions, phased inclusion is critical to prevent carbon leakage and phase out free allowances.
The EU CBAM: a two-way street between the EU and Africa
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!
Get involved
Support our efforts to develop an effective CBAM that benefits the climate, the EU, and its trade partners.
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Sandbag is a not-for-profit (ASBL) organisation registered in Belgium under the number 0707.935.890.
EU transparency register no. 277895137794-73.
VAT: BE0707935890.