Advancing the Implementation of the EU Carbon Border Adjustment Mechanism

Annex A. Ongoing and future CBAM policy developments

Pending legal acts and ongoing review

The CBAM framework is designed to evolve over time, balancing carbon leakage prevention with administrative proportionality, achieved through a combination of mandated legislative reviews, stakeholder consultations, and the phased adoption of detailed implementing and delegated acts. The primary legal framework, the CBAM Regulation 2023/956, has already been amended, most notably by the amending Regulation 2025/2083 which aims at simplifying and strengthening CBAM rules. While the core CBAM Regulation 2023/956 and most implementing acts needed for the definitive period have been adopted at the time of writing, some implementing and delegated acts are still expected in 2026 (Table A A.1).

Table A A.1. CBAM-related legal acts

Legal acts	Topic	Status
CBAM Regulation 2023/956	Core CBAM key features and rules	Adopted on 10 May 2023
Amending Regulation 2025/2083	Simplification and strengthening of CBAM rules	Adopted on 17 October 2025
Implementing Regulation 2023/1773	Rules for the transitional period	Adopted on 17 August 2023
Implementing Regulation 2024/3210	CBAM Registry mechanism and functions	Adopted on 18 December 2024
Implementing Regulation 2025/486	Conditions and procedures related to the status of authorised CBAM declarant	Adopted on 17 March 2025
Implementing Act 2025/2210	Conditions for CBAM application to goods brought to the continental shelf or Exclusive Economic Zone (EEZ)	Adopted on 31 October 2025
Delegated Act 2025/2551	Conditions for accreditation and verifiers	Adopted on 20 November 2025
Implementing Act 2025/2047	Methods for the calculation of emissions embedded in goods	Adopted on 10 December 2025
Implementing Act 2025/2549	Amending and correcting the conditions and procedures related to the status of authorised CBAM declarant	Adopted on 10 December 2025
Implementing Act 2025/2550	Amending and correcting CBAM Registry mechanism and functions	Adopted on 10 December 2025
Implementing Act 2025/2621	Default values	Adopted on 16 December 2025
Implementing Act 2025/2546	Verification principles	Adopted on 10 December 2025
Implementing Act 2025/2548	Calculation and publication of the price of CBAM certificates	Adopted on 10 December 2025
Implementing Act 2025/2620	Adjustments for free allocations under EU ETS	Adopted on 17 December 2025
Implementing Act 2025/2619	Information communicated by customs authorities	Published on 17 December 2025
Legislative proposals	Extension of CBAM scope to downstream goods, export solution and anti-circumvention measures	Published on 17 December 2025
Delegated Act	Conditions for sale and re-purchase of CBAM certificates	In preparation
Implementing Act	Carbon price in third countries	In preparation, draft published on 13 May 2026
Implementing Act	CBAM declarations	In preparation

Source: Authors.

Potential extension of the CBAM scope

The CBAM is designed as an evolving instrument to address carbon leakage effectively. Its scope is subject to regular review by the European Commission, with the objective of better aligning CBAM coverage with EU ETS sectors at risk of carbon leakage. Possible extensions include addition precursors, additional downstream goods at risk of carbon leakage, other sectors such as organic chemicals and polymers, indirect emissions for currently covered goods where only direct emissions apply initially (iron and steel, aluminium, and hydrogen), and emissions from transport of goods.

The European Commission published a legislative proposal on the extension of the CBAM scope to downstream goods of existing sectors in December 2025 (European Commission, 2025[1]). At the time of writing, the proposal is under negotiation. Developing a robust methodology to assess carbon leakage risk across thousands of potential products, each with unique supply chains and value-added stages, is a data-intensive and methodologically challenging task (ERCST, 2024[2]). Defining relevant downstream products, especially in steel and aluminium value chains, requires balancing carbon leakage risks against administrative complexity, with default values likely to play a larger role.

The inclusion of organic chemicals, polymers and other heterogeneous sectors remains technically difficult. Their initial exclusion reflected unresolved challenges in allocating emissions from complex, multi-output production processes. Similar difficulties arise for diverse EU ETS sectors such as ceramics or paper, where product definitions and embedded-emissions calculations are less straightforward than for the current CBAM sectors.

Including indirect emissions for all CBAM goods would increase coverage but raises challenges. Electricity-related emissions, covered by the EU ETS, is an important cost for EU energy-intensive sectors, while many third-country producers do not face similar costs, or benefit from preferential electricity prices. Several EU Member States also provide compensation for all or part of the EU ETS induced electricity costs. The inclusion of indirect emissions for all CBAM goods in the scope of CBAM would thus require a solution for accounting for this compensation mechanism, especially from a WTO perspective. In addition, extending indirect emissions coverage to all CBAM goods could increase the risk of resource shuffling in some sectors. Methodological uncertainties also remain, notably on how to determine electricity emission factors across jurisdictions and how to account for low-carbon electricity sources and market-based instruments, such as guarantees for origins (ERCST, 2021[3]; ERCST, 2022[4]).

The scope extension to transport emissions is also considered for policy coherence with EU ETS 2, which will notably implement carbon pricing in road transport fuels starting in 2028, but MRV challenges are substantial. While Article 30(2)(a)(ii) of the CBAM Regulation 2023/956 provides for assessing the inclusion of embedded emissions related to the transport of CBAM goods and transportation services, MRV challenges are significant, involving tracking transport emissions per individual shipment, allocating them across diverse goods within consignments, differentiating complex multi-modal transport legs, and engaging a vast, fragmented global logistics sector. Furthermore, emissions related to international maritime transport is already included under the EU ETS 1 and the inclusion of international aviation emissions is under consideration.

Future CBAM scope changes will likely be guided by several factors, including carbon leakage, feasibility, economic impact and geopolitical risks. Technical feasibility and administrative proportionality, as emphasised by the simplification rules contained in the amending Regulation 2025/2083, are essential for a workable CBAM and broad acceptance across domestic stakeholders and international partners. Economic impacts on EU industries and trading partners as well as policy coherence with EU ETS 1 and 2 and compatibility with WTO rules are also key. Crucially, geopolitical factors could significantly influence these decisions (Otto, 2025[5]).

Other border carbon adjustments (BCAs) and international cooperation on carbon pricing

The CBAM has become a catalyst for national and global discussions on carbon pricing and BCAs, prompting economies to consider and fast-track the implementation of their own carbon pricing scheme or BCA. The need for international coordination on core design elements becomes paramount to prevent trade distortions, ensure environmental effectiveness, and foster a coherent global approach to carbon leakage.

Several countries are taking different approaches to carbon pricing and BCAs, stressing the opportunity and challenges ahead for effective cooperation on these issues:

• The United Kingdom (UK) will introduce its own CBAM in 2027, broadly aligned with the EU CBAM sectoral scope (UK Government, 2024[6]). The UK CBAM will require importers to account for emissions embodied in imported goods, with the financial liability based on the UK ETS1 price. The EU and UK are currently in talks to link their respective ETS and CBAM schemes to avoid trade distortions, guarantee smoother implementation, get more stable prices and streamline regulatory barriers for operators (UK Government, 2025[7]). A potential link between EU and UK ETS could include exemptions from their respective CBAMs (European Commission, 2025[8]).

• In the United States (US), several legislative proposals have emerged to price emissions embedded in imported goods. The Foreign Pollution Fee Act of 2025 (119th US Congress, 2025[9]), for instance, proposes import customs duties on goods based on their pollution intensity relative to US manufacturing standards. Other proposals include the Clean Competition Act (118th US Congress, 2023[10]) and the Prove It Act of 2025 (119th US Congress, 2025[11]).

• The People’s Republic of China (hereinafter ‘China’), home of the world’s largest ETS by emission coverage, announced its expansion from power to cement, steel and aluminium sectors, directly overlapping with CBAM sectors (China's State Council, 2025[12]). EU-China cooperation on emissions trading – as illustrated by the June 2024 Memorandum of Understanding between the European Commission and China's Ministry of Ecology and Environment (2024[13]) – remains important for data transparency, MRV alignment and any future recognition of China’s ETS under the CBAM.

• The Republic of Türkiye’s (hereinafter ‘Türkiye’) ETS is moving from design to implementation and will likely partly reduce CBAM exposure. The 2025 Climate Law (Grand National Assembly of Türkiye, 2025[14]) established the legal basis for a national ETS, with a pilot phase expected in 2026 and detailed rules under development. The system will build on Türkiye’s existing MRV framework, and the likely coverage of over 800 emission-intensive installations in the power, cement, metals, chemicals and refining sectors would limit CBAM-related costs (ICAP, 2025[15]; ICAP, 2024[16]).

• Japan has moved from voluntary to mandatory carbon pricing under its Green Transformation strategy. The national GX ETS became mandatory in April 2026 for large emitters across all major industrial sectors, covering around 60% of national emissions (IETA, 2026[17]). The European Commission and Japan cooperate on carbon pricing CBAM-related issues, including avoiding double burdens on exporters, through the EU-Japan Green Alliance (European Union External Action, 2024[18]).

• Norway – covered by the EU ETS – plans to apply the EU CBAM by 2027, and other jurisdictions are exploring the introduction of BCAs (Norwegian Government, 2025[19]). This includes Chinese Taipei, Australia, Canada, Chile and Thailand and Chile (Austrian Ministry of Finance, 2025[20]; Government of Canada, 2025[21]; Ministry of Energy of Chile, 2024[22]; Government of Thailand, 2025[23]; Taipei Times, 2025[24]).

For these fragmented initiatives to evolve into an interoperable global framework, four challenges are central:

• Interoperability of emission accounting frameworks: Ensuring interoperability is foundational and requires interoperable methodologies – including system boundaries, emission factors, and MRV rules – for calculating embedded emissions (OECD, 2025[25]). The existing EU-Switzerland ETS linkage provides a successful precedent for aligning such MRV rules between distinct carbon pricing systems (European Commission, 2019[26]; Verde and Borghesi, 2022[27]);

• Recognition of carbon pricing paid abroad: Transparent rules for recognising carbon prices effectively paid in countries of origin is essential to avoid double charging and to incentivise broader carbon pricing adoption (ERCST, 2023[28]). This requires considering not only explicit carbon taxes and ETS prices but also developing methodologies to assess the effective carbon price after considering rebates, subsidies, or other forms of compensation (Article 9 of the CBAM Regulation 2023/956);

• Data exchange: Secure, reliable, interoperable digital platforms and common data standards are critical to allow data exchange between jurisdictions. The CBAM Registry and its Operators of Third Country Installations (O3CI) portal access are steps in this direction within the EU context (European Commission, 2025[29]);

• Scope consistency and management of downstream leakage: As the extension of CBAM scope to downstream goods is under consideration, greater international alignment on product coverage will become increasingly important to prevent leakage from shifting further down value chains or to different jurisdictions. This requires careful cost-benefit analysis to ensure administrative burdens remain proportional to environmental gains (ERCST, 2024[2]).

International dialogue can play an important role in enabling information and data sharing (Climate Club, 2024[30]). This can take place within fora like the UNFCCC, the OECD’s IFCMA, or the Climate Club. Such international dialogues could also contribute to fostering greater coherence among national and regional carbon pricing and BCA initiatives, and over time, support approaches that are more interoperable.

References

[10] 118th US Congress (2023), Clean Competition Act, https://www.congress.gov/bill/118th-congress/senate-bill/3422/text.

[9] 119th US Congress (2025), Foreign Pollution Fee Act of 2025, https://www.congress.gov/bill/119th-congress/senate-bill/1325/text/is.

[11] 119th US Congress (2025), Prove It Act, https://www.congress.gov/bill/119th-congress/house-bill/1163.

[20] Austrian Ministry of Finance (2025), Admission as CBAM applicant (from 2025), https://www.bmf.gv.at/themen/klimapolitik/carbon-markets/Carbon-Border-Adjustment-Mechanism-(CBAM)-/bepreisungsphase-ab-2026/zulassung-als-cbam-anmelder-(ab-1.-J%C3%A4nner-2025).html.

[12] China’s State Council (2025), China expands carbon trading market to steel, cement, aluminum smelting sectors, https://english.www.gov.cn/news/202503/27/content_WS67e487ddc6d0868f4e8f1358.html.

[30] Climate Club (2024), Summary report of the Strategic Dialogues on causes and relevance of spillovers from mitigation policies, OECD Publishing, Paris, https://doi.org/10.1787/30236662-en.

[2] ERCST (2024), Including products further down the value chain in the EU CBAM, https://ercst.org/including-products-further-down-the-value-chain-in-the-eu-cbam/.

[28] ERCST (2023), Methods for Crediting Carbon Prices under the CBAM, https://ercst.org/crediting-carbon-prices-under-the-cbam/.

[4] ERCST (2022), Indirect Emissions in the EU CBAM, https://ercst.org/indirect-emissions-in-the-eu-cbam-2022/#.

[3] ERCST (2021), Border Carbon Adjustments in the EU: Sectoral Deep Dive, https://ercst.org/wp-content/uploads/2021/08/20210317-CBAM-II_Report-I-Sectors.pdf.

[29] European Commission (2025), CBAM Registry and Reporting Access for non-EU installation operators, https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism/cbam-registry-and-reporting_en#access-for-non-eu-installation-operators.

[1] European Commission (2025), Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards the extension of its scope to downstream goods and anti-circumvention measures, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52025PC0989.

[8] European Commission (2025), Recommendation for a Council Decision authorising the opening of negotiations to link the United Kingdom and the Union’s greenhouse emissions trading systems, https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2025)408&lang=en.

[26] European Commission (2019), Agreement on linking the emissions trading systems of the EU and Switzerland, https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6708.

[13] European Commission and China’s Ministry of Ecology and Environment (2024), Memorandum of Understanding to Enhance Cooperation on Emissions Trading between the European Commission and the Ministry of Ecology and Environment of the People’s Republic of China, https://climate.ec.europa.eu/document/download/9d1329c1-45e5-460a-8013-ad73c75c96f5_en?filename=policy_carbon_international_mou_en.pdf.

[18] European Union External Action (2024), EU-Japan Green Alliance to Inspire Ambitious Post-2030 Climate Goals, https://www.eeas.europa.eu/delegations/japan/eu-japan-green-alliance-inspire-ambitious-post-2030-climate-goals_en?s=169.

[21] Government of Canada (2025), Exploring Border Carbon Adjustments for Canada, https://www.canada.ca/en/department-finance/programs/consultations/2021/border-carbon-adjustments/exploring-border-carbon-adjustments-canada.html.

[23] Government of Thailand (2025), Climate Change Bill, https://www.parliament.go.th/section77/manage/files/file_20240322151725_1_371.pdf.

[14] Grand National Assembly of Türkiye (2025), Climate Change Law, https://cdn.tbmm.gov.tr/KKBSPublicFile/D28/Y3/T2/WebOnergeMetni/c0986a6f-d636-4c89-a92f-5db951eeeb09.pdf.

[15] ICAP (2025), Turkish Emission Trading System, https://icapcarbonaction.com/en/ets/turkish-emission-trading-system.

[16] ICAP (2024), Türkiye envisions central role for ETS in 2024-2030 climate strategy, https://icapcarbonaction.com/en/news/turkiye-envisions-central-role-ets-2024-2030-climate-strategy.

[17] IETA (2026), Carbon Markets & Emissions TRading in Japan: Unleashing the Green Transformation, https://www.ieta.org/uploads/wp-content/Resources/Reports/IETA_JP.WEB.pdf.

[22] Ministry of Energy of Chile (2024), Anteproyecto: Plan Sectorial de Mitigación y Adaptación al Cambio Climático del Sector Energía, https://energia.gob.cl/sites/default/files/documentos/202407_anteproyecto_psma_energia_0.pdf.

[19] Norwegian Government (2025), This is how Norway will introduce CBAM, https://www.regjeringen.no/no/aktuelt/slik-skal-norge-innfore-cbam/id3090713/.

[25] OECD (2025), “Towards interoperable carbon intensity metrics: Assessing monitoring, reporting and verification systems”, Inclusive Forum on Carbon Mitigation Approaches Papers, No. 9, OECD Publishing, Paris, https://doi.org/10.1787/b185bcfa-en.

[5] Otto, S. (2025), “The external impact of EU climate policy: political responses to the EU’s carbon border adjustment mechanism”, International Environmental Agreements: Politics, Law and Economics, Vol. 25/2, pp. 177-194, https://doi.org/10.1007/s10784-025-09667-z.

[24] Taipei Times (2025), Carbon tariff bill could come this year: minister, https://www.taipeitimes.com/News/taiwan/archives/2025/02/18/2003832067.

[7] UK Government (2025), Policy Paper UK-EU Sumit - Explainer, https://www.gov.uk/government/publications/ukeu-summit-key-documentation/uk-eu-summit-explainer-html.

[6] UK Government (2024), Introduction of a UK Carbon Border Adjustment Mechanism from January 2027: Government response to the policy design consultation, https://assets.publishing.service.gov.uk/media/679cb194a9ee53687470a2fa/Introduction_of_a_UK_Carbon_Border_Adjustment_Mechanism_from_January_2027_-_Government_response_to_the_policy_design_consultation.pdf.

[27] Verde, S. and S. Borghesi (2022), “The International Dimension of the EU Emissions Trading System: Bringing the Pieces Together”, Environmental and Resource Economics, Vol. 83/1, pp. 23-46, https://doi.org/10.1007/s10640-022-00705-x.

Note

← 1.  The UK was part of EU ETS before Brexit. The UK currently operates its own UK ETS which is not linked with EU ETS (note that EU ETS still covers power generation in Northern Ireland).