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The report evaluates the IMO Net-Zero Framework (NZF), a hybrid measure combining a GHG Fuel Intensity (GFI) standard with a two-tier carbon pricing system. It concludes that the NZF is likely to result in modest emission reductions of 10-15% by 2030, falling short of the 1.5°C-compatible requirement of a 45% cut. The analysis highlights a weak effective carbon price of approximately USD 10–15/tCO₂eq, which is insufficient to make zero-emission fuels competitive and risks locking in fossil LNG. Revenue generation is projected to be limited (around USD 15 billion annually), significantly lower than a high flat levy scenario. The report also examines the distributional impacts, noting that SIDS and LDCs may not receive sufficient funding, and proposes integration pathways for the EU to maintain its climate ambition while participating in the global scheme.

The document analyzes the IMO's Net-Zero Framework (NZF), which was delayed by one year in October 2025 due to pressure from the US and oil-producing nations. A study by Cincera Consulting finds the NZF is inadequate, projecting emission reductions of only 8-10% by 2030, far below the 45% required by the Paris Agreement. The brief criticizes the NZF's hybrid approach—combining a GHG fuel standard with limited carbon pricing—noting that the effective carbon price of $14/tCO2eq is too low to drive a transition to green fuels. It recommends that the EU expand its Emissions Trading System (ETS) to cover 100% of emissions for voyages entering or leaving the European Economic Area and urges the IMO to adopt a universal levy to address absolute emissions.

The report argues that G20 countries have failed to meet their 2009 pledge to phase out inefficient fossil fuel subsidies, with spending reaching USD 665 billion in 2023. It introduces a categorization framework that divides subsidies into 'quick phase-out' (within 1 year), 'phase-out with a robust strategy' (2-4 years), and 'time-limited exemptions' (4+ years). Applying this to Brazil, Germany, Italy, Mexico, and South Africa, the authors find that while a significant number of measures (30-55%) can be removed quickly, the majority of fiscal value is tied to deeply embedded structural subsidies requiring sequenced reform and mitigation measures.

The document examines how Poland's high energy intensity and reliance on fossil fuels create economic vulnerabilities, specifically through high electricity and gas prices and EU ETS costs. It posits that transitioning to low-emission technologies and improving energy efficiency can lower production costs and boost GDP. The briefing highlights the role of renewable energy, such as wind and solar, and Power Purchase Agreements (PPAs) in stabilizing energy prices. It also discusses the importance of emission transparency for consumer appeal and provides case studies of Polish companies like ORLEN, Galmet, and Kompania Piwowarska implementing decarbonization strategies.

The brief argues that Poland should prioritise clean hydrogen deployment in heavy industry, specifically in refining, fertilisers, chemicals, and primary steel. It recommends a staggered production strategy, starting with low-carbon hydrogen (natural gas with CCS) to ensure stable, cost-competitive baseload supply while the electricity grid is decarbonised to support future renewable hydrogen. Additionally, it suggests aligning deployment with industrial clusters, such as the Silesia-Opole region, to share CO2 transport and storage infrastructure and meet EU mandates.

The report argues that while supply-side subsidies and carbon pricing are necessary, they are insufficient to close the cost gap for near-zero emissions industrial products. It recommends that the EU implement harmonised embodied carbon labelling and mandatory procurement quotas for decarbonised materials in high-impact sectors such as construction, automotive, and food retail to create stable lead markets.

The report examines four EU climate regulations—the Carbon Border Adjustment Mechanism (CBAM), the EU Deforestation Regulation (EUDR), the EU ETS for Shipping, and Methane Regulations—and their disproportionate effects on African economies. It highlights risks such as GDP reduction, loss of export revenue, and increased maritime costs, while calling for financial support, technical capacity building, and a shift toward global rather than unilateral regulatory frameworks.

The document provides a comprehensive introduction to the ETS2, a 'cap and trade' system starting in 2027 to reduce emissions in buildings and road transport by 42% relative to 2005 levels by 2030. It details the market mechanisms, including the Linear Reduction Factor and the Market Stability Reserve (MSR2), and emphasizes that carbon pricing must be paired with complementary policies—such as building renovations and EV electrification—to prevent price volatility and ensure a just transition. The guide also describes the Social Climate Fund (SCF), a €65 billion mechanism designed to support vulnerable households facing energy and transport poverty, and analyzes the distribution and potential misuse of ETS2 revenues among member states.

The Netherlands is implementing a multi-level approach to phase out fossil fuel subsidies, focusing on international cooperation through the COFFIS coalition and EU-wide mechanisms like the EU ETS and CBAM. Nationally, the government uses an 'external costs approach' to identify price gaps, which amounted to a fossil subsidy of 18.0 billion euros in 2024. The plan includes raising energy taxes on natural gas through 2030, introducing a differentiated air passenger tax in 2027, and phasing out specific exemptions for greenhouse horticulture and coal use. However, several subsidies remain due to international treaties (e.g., the Energy Taxation Directive) or concerns over carbon leakage and social fairness.

Carbon Market Watch argues that indirect cost compensation under the EU ETS should be phased out rather than expanded to new sectors. The organization identifies several flaws in the current State aid guidelines, including the use of fossil-fuel-only generation capacity to determine CO2 emission factors and a lack of transparency regarding which companies receive aid. It specifically warns that including primary plastics and organic chemicals in the compensation scheme would subsidize fossil-fuel-reliant production and undermine circular economy efforts.

Carbon Market Watch argues against scrapping the CBAM despite industry complaints about administrative complexity, suggesting instead that the EU quantify actual carbon leakage and circumvention risks before expanding the mechanism to downstream products. The organization emphasizes that complementary EU policies like the Digital Product Passport and international standards can mitigate administrative burdens. It further recommends providing special treatment for Least Developed Countries (LDCs) and Small Island Developing States (SIDS) to align with UNFCCC principles.

Carbon Market Watch proposes extending the EU ETS to include all departing flights from the European Economic Area (EEA), non-CO2 aviation effects, and private jets. The brief argues that the current limited scope—covering only intra-EEA flights—fails to address the sector's full climate impact and misses significant revenue opportunities. By implementing these extensions and applying carbon price multipliers for private jets, the EU could generate substantial funds to finance e-kerosene development, upgrade railway infrastructure via the Trans-European Transport Core Network (TEN-T), and meet international climate finance targets. The author specifically recommends replacing support for biofuels with a focused e-kerosene scheme extended to 2040.

Carbon Market Watch criticizes proposals to compensate EU exporters under the Carbon Border Adjustment Mechanism (CBAM), arguing that the actual competitiveness risk is limited and that subsidies would reward polluters. The author contends that CBAM revenue should not be used to subsidize EU producers, as this could conflict with WTO rules and encourage the export of polluting products. Instead, the document advocates for targeted financial support for clean technology innovation and the global expansion of carbon pricing.

A coalition of NGOs, including Carbon Market Watch, warns that the European Commission's draft delegated act for permanent carbon removals—covering DACCS, BioCCS, and biochar—fails to meet the legal requirements of the CRCF regulation. The group argues the methodologies are of low quality, fail to address indirect land use change, assume automatic additionality, and lack sufficient MRV and liability rules for biochar. They call on the European Parliament and Council to object to the draft and urge the Commission to prevent the integration of these units into the EU ETS until quality is ensured.

The document contends that the EU's decision to exempt international aviation from the ETS since 2012, largely due to US political and industry pressure, has failed to reduce emissions. It criticizes the ICAO's CORSIA framework as ineffective and calls for the EU to resume pricing international aviation emissions, proposing that the resulting revenue be directed toward global climate finance for vulnerable countries.

The European Commission's proposed net 90% emissions reduction target for 2040 is criticized by Carbon Market Watch for being inadequate and lacking accountability. The analysis highlights risks associated with the potential use of international carbon credits, the absence of separate targets for gross emissions and removals, and the proposed integration of permanent removals into the EU ETS, which may create loopholes for polluters.

Carbon Market Watch argues that the EU ETS1 fails to drive industrial decarbonisation due to the continued allocation of free emission allowances, which it claims undermines the carbon price signal for sectors like steel, cement, and chemicals. The submission calls for the complete phase-out of free allocations and indirect cost compensation, suggesting that any remaining benefits be tied to decarbonisation milestones. It further advocates for expanding the ETS scope to cover all departing flights from 2027, including non-CO2 effects and flights to third countries, and extending maritime coverage to 100% of extra-EEA routes and all small ships by 2027. Regarding market stability, the document suggests maintaining existing Market Stability Reserve (MSR) and Linear Reduction Factor (LRF) rules until 2035 to preserve investment signals. Finally, it strongly opposes the integration of carbon removals into the EU ETS to avoid mitigation deterrence and the risk of using removals as a substitute for actual emission reductions.

The report examines four scenarios for extending the EU ETS aviation scope beyond intra-EEA flights, potentially increasing revenues up to 1,160 billion € by 2040. It argues that including non-CO2 effects and private jets would significantly boost funding for sustainable aviation fuels (SAF), rail infrastructure (TEN-T), and international climate finance (NCQG).

The report finds that current EU ETS cap trajectories are more ambitious than required by most climate neutrality scenarios, potentially leading to severe allowance shortages and price spikes after 2035. It evaluates several reform options to balance supply and demand, including adjusting the linear reduction factor (LRF), reforming the Market Stability Reserve (MSR), and integrating carbon dioxide removals (CDRs). The authors warn against the inclusion of Article 6 international credits due to risks to environmental integrity and the potential for market collapse. Recommended solutions include a combination of MSR replenishment and technological CDRs or a phased reduction of the LRF post-2035.

An open letter from Carbon Market Watch and other signatories urging EU leadership to reject the use of Article 6 international credits to meet 2040 climate goals. The authors argue that relying on international credits undermines EU leadership, poses reputational risks due to poor environmental integrity, fails to provide genuine climate finance, and increases the long-term economic costs of the energy transition. They call for a science-based domestic target of at least 90% net reductions to ensure environmental integrity and maintain the EU's credibility as a historic emitter.