10 Key Principles for a Carbon Border Adjustment Measure (CBAM)

Carbon Market Watch proposes ten principles for the EU's Carbon Border Adjustment Measure (CBAM), arguing that it must replace free allocation of allowances in the EU ETS to adhere to the 'polluter-pays' principle. The organization recommends that CBAM cover direct and indirect emissions in high-emitting sectors like steel, cement, and bulk chemicals, and be implemented as an extension of the EU ETS. Key social and diplomatic recommendations include exempting Least Developed Countries (LDCs) and Small Island Developing States (SIDS), recycling revenues into climate action, and using the mechanism to complement international climate diplomacy and product requirements.

• A CBAM should only be implemented as an alternative to current carbon leakage protections, requiring the complete and rapid phase-out of all free allocation under the EU Emissions Trading System (EU ETS). Maintaining free allocations while introducing CBAM would constitute double protection for industries and likely violate WTO rules as both are considered subsidies.
• The mechanism should target the highest emitting sectors—specifically steel, cement, and bulk chemicals (such as fertilisers and polyethylene), which represent nearly 60% of industrial emissions under the EU ETS. It should also include the power sector in cases of high carbon electricity imports from neighbouring countries.
• The most effective design is an extension of the EU ETS to imports, requiring foreign producers or importers to purchase EU ETS allowances (EUAs) that are cancelled upon entry into the EU market. This approach is preferred over a separate pool of allowances, which would undermine the level playing field and complicate price mirroring.
• To ensure equity and climate justice, the EU should exempt Least Developed Countries (LDCs) and Small Island Developing States (SIDS) from the CBAM. Additionally, countries with similar climate policies regulating the relevant sectors should be exempt from the carbon cost.
• CBAM revenues should be fully earmarked for climate action, with portions distributed to developing countries as climate finance and others directed to EU funds like the Innovation Fund and Modernisation Fund to support renewable energy and climate-neutral technologies.

APA

Carbon Market Watch (2020). 10 Key Principles for a Carbon Border Adjustment Measure (CBAM). https://carbonmarketwatch.org/wp-content/uploads/2020/10/10-Key-Principles-for-a-Carbon-Border-Adjustment-Measure-CBAM_CMW.pdf

Chicago

Carbon Market Watch. 10 Key Principles for a Carbon Border Adjustment Measure (CBAM). 2020. https://carbonmarketwatch.org/wp-content/uploads/2020/10/10-Key-Principles-for-a-Carbon-Border-Adjustment-Measure-CBAM_CMW.pdf.

Wikipedia

{{cite press release |author=Carbon Market Watch |title=10 Key Principles for a Carbon Border Adjustment Measure (CBAM) |date=October 2020 |url=https://carbonmarketwatch.org/wp-content/uploads/2020/10/10-Key-Principles-for-a-Carbon-Border-Adjustment-Measure-CBAM_CMW.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{carbonmarketwatch2020key, author = {{Carbon Market Watch}}, title = {{10 Key Principles for a Carbon Border Adjustment Measure (CBAM)}}, publisher = {Carbon Market Watch}, year = {2020}, month = oct, url = {https://carbonmarketwatch.org/wp-content/uploads/2020/10/10-Key-Principles-for-a-Carbon-Border-Adjustment-Measure-CBAM_CMW.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }