The Carbon Border Adjustment Mechanism (CBAM) aims to gradually replace the current system of partial Emission Trading Scheme (ETS) free allowances as a carbon leakage protection measure. However, the CBAM is an unprecedented and untested measure, which risks being undermined by resource shuffling by third countries exporters that will focus clean steel production to the EU, while diverting more carbon intensive products to third countries. Moreover, with the new system steel produced in the EU will be exported on global markets with an additional carbon cost already in 2026, which will increase exponentially in the period up to 2034.
It is therefore critical that the effectiveness of CBAM is properly monitored and secured within the entire-value-chain, including downstream sectors, as also highlighted in the Draghi report . Urgent solutions must be found for any issues identified during the monitoring phase.
• Introduce urgent measures to preserve steel exports and to avoid circumvention, resource shuffling and delocalisation of downstream sectors; monitor the transition from free allocation to CBAM and immediately take the necessary action if these measures are not effective.