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The research paper evaluates nine climate policy scenarios to determine the most effective way to address carbon leakage in the EU ETS. Using the CASE II model, it compares full auctioning against various border adjustment (BA) and output-based allocation (OB) strategies. The findings suggest that while full auctioning leads to a leakage ratio of 10%, border adjustments are the most efficient at reducing this ratio, often resulting in negative leakage (spillovers) where emissions in the rest of the world actually decrease. Output-based allocations also reduce leakage but are less efficient than border adjustments and can lead to higher carbon prices.

The document assesses the challenges of the EU's proposed CBAM based on incurred emissions, noting that it fails to fully address carbon leakage for exports and value chains. It proposes an alternative 'climate contribution' based on standardised carbon intensity factors, which would act as an excise charge that can be passed along the supply chain and waived for exports. This model, combined with Carbon Contracts for Difference (CCfDs) funded by CBAM revenues, is presented as a way to create immediate investment incentives for climate-neutral production of materials like steel, cement, and aluminium.

The document evaluates two policy instruments designed to transition the European basic materials sector to net zero by 2050. Carbon Contracts for Difference (CCfDs) are presented as a way to reduce investment risk and government costs by guaranteeing a fixed carbon price for low-carbon projects. The Climate Contribution is proposed as a weight-based charge on materials (like steel and cement) to ensure a consistent carbon price signal while maintaining carbon leakage protection. The analysis suggests that CCfDs can lower the required carbon price for investment and that the Climate Contribution could generate approximately EUR 17-21 billion in annual EU revenues with minimal, progressive impacts on household consumption in Germany and Poland.

The report evaluates Carbon Contracts for Difference (CCfDs) and a Climate Contribution as tools for decarbonising the basic materials sector in Germany and Poland. CCfDs act as hedging instruments that lower the carbon price threshold required for clean technology investments and reduce the net present value of government funding. The Climate Contribution, a weight-based charge on materials, is estimated to generate EUR 17-21 billion in EU-wide revenues while remaining progressive and having a minimal impact (below 0.5%) on household consumption expenditures.

The report critiques CBAM designs based on incurred emissions due to legal, administrative, and economic risks, such as resource shuffling and export leakage. It proposes a three-pillar alternative: a 'climate contribution' charge on basic materials, dynamic free EU ETS allowance allocation conditional on transition plans, and Carbon Contracts for Difference (CCfDs) to fund the incremental costs of clean production. This framework aims to provide effective carbon price signals across the value chain and support an inclusive transition across all EU industrial regions.

The briefing paper contends that carbon prices in Phase III of the EU ETS will likely fall in the lower end of the €20-40/tCO2 range, contradicting higher projections from the European Commission and other modelling studies. The author bases this on historical evidence showing that costs for environmental regulations—such as CFC phase-outs and sulphur dioxide trading—are consistently overestimated. The analysis highlights that current models often fail to account for the synergy between the EU's carbon cap and its other policy pillars, specifically the 20% energy efficiency target and renewable energy directives. Furthermore, the document notes that the 2007-2008 economic crisis, characterized by lower growth forecasts and higher fossil fuel prices, will further depress emissions and carbon prices. The author also points to the potential for a price collapse if the EU increases its acceptance of international credits from the Clean Development Mechanism (CDM).

The document argues that the EU's 2030 framework must combine price-based instruments with structural and behavioural policies to drive decarbonisation. It suggests reforming the EU ETS to better signal long-term scarcity and phase out coal, introducing new auctioning and project-based mechanisms for non-ETS sectors to ensure liquidity and transformation resources, and establishing a streamlined governance mechanism for Member State coordination through national decarbonisation plans.

Climate Strategies proposes that the EU 2030 framework must move beyond a single greenhouse gas target to a three-pillar system: standards and engagement (Pillar I), markets and pricing (Pillar II), and strategic investment for innovation (Pillar III). The authors argue that relying on any single pillar is self-defeating and that a hybrid price-and-quantity instrument for the EU ETS is necessary to provide the stability required to attract institutional investment. This framework is presented as a means to stimulate economic growth and utilize surplus private capital for low-carbon infrastructure.

The report examines the transition of the European basic materials sector (cement, steel, paper, aluminium, chemicals) toward carbon neutrality by 2050. It identifies that these sectors account for approximately 16% of European GHG emissions. Through analysis of Hungary, Poland, and Spain, the document highlights a prevalence of short-term policy focuses on carbon leakage and energy costs over long-term structural transformation. It proposes a policy package consisting of carbon pricing mechanisms (Border Tax Adjustments or Inclusion of Consumption), low-emission and circularity standards, and Contracts for Differences (CCfDs) to incentivise breakthrough technologies and ensure a cost-competitive supply of low-carbon electricity.

The document provides a comprehensive overview of carbon finance, detailing instruments such as carbon taxes, credits, and cap-and-trade systems. It analyzes the operational requirements for implementing these mechanisms, the differences between shallow and mature markets, and the specific impacts on sectors like industrial decarbonization and AFOLU. The briefing also highlights the role of the EU ETS and CBAM, as well as the challenges related to monitoring, reporting, and verification (MRV) and the policy uncertainty surrounding Article 6 of the Paris Agreement.

The report analyzes how the EU chemical sector has avoided the costs of carbon pollution through free allowances under the EU ETS, noting that 98% of emissions since 2013 were covered. It highlights that the sector remains a major emitter, with emissions increasing in 2024, and that the Carbon Border Adjustment Mechanism (CBAM) currently only covers a small fraction of the industry. The author argues that this system protects polluters and hinders decarbonization, specifically citing BASF as an example of a company receiving more allowances than it needs while opposing carbon costs. The report recommends a clear phase-out timeline for free allowances, more ambitious benchmarking, and the introduction of decarbonization conditionalities.

A joint statement from NGOs (GLOBAL 2000, WWF, VCÖ) to the Austrian Environment Minister calling for the EU's Effort Sharing Regulation (ESR) to be revised with higher emission reduction targets, updated baselines, and the closure of forestry and ETS loopholes to meet Paris Agreement goals.

The briefing examines the impact of aviation emissions and the failure of international measures, specifically CORSIA, to align with the Paris Agreement. It details the 'stop-the-clock' derogation that paused EU ETS enforcement for flights entering and leaving Europe and warns that continuing this exemption risks the EU's 2030 climate targets and increases the oversupply of emission allowances.

Carbon Market Watch argues that a Carbon Border Adjustment Mechanism (CBAM) is preferable to the free allocation of allowances in the EU ETS, provided it is implemented without double protection. The organization recommends that CBAM cover cement, steel, chemicals, and power, and that its revenues be primarily disbursed as climate grants to developing countries. It further suggests that Least Developed Countries and Small Island Developing States be exempted from CBAM obligations to uphold the principle of common but differentiated responsibilities.

A coalition of 61 organizations argues that the Clean Development Mechanism (CDM) should be terminated by 2020 to protect the integrity of the Paris Agreement. The authors claim the CDM undermines domestic climate action, has increased global greenhouse gas emissions due to 'junk' credits, and has led to human rights violations and inequitable benefit distribution.

Carbon Market Watch criticizes the EU ETS's free allocation of pollution permits, claiming it has generated over 25 billion euros in windfall profits and stalled industrial emissions cuts. The organization argues that the current approach fails to align with Paris climate goals and recommends a more rigorous impact assessment for the 2021-2030 carbon leakage list. Key recommendations include accounting for international climate policies (such as the Chinese and Californian ETS), focusing on direct emissions, and applying the precautionary principle to ensure only sectors at very high risk of carbon leakage receive free allowances.

Carbon Market Watch argues that the EU ETS should restart in full scope in 2017 and that the ICAO's GMBM must be a legally binding floor for ambition rather than a ceiling. The organization advocates for the elimination of free allowances for aviation, the use of a multiplier of at least two for CO2 emissions to account for non-CO2 climate impacts, and the earmarking of auctioning revenues for the Green Climate Fund.

Carbon Market Watch urges the European Commission to adopt the most ambitious options for the EU ETS aviation coverage, specifically advocating for full coverage of emissions and 100% auctioning of allowances from the regulation's adoption. The organization criticizes CORSIA as an ineffective climate strategy and warns that replacing EU ETS coverage with CORSIA would reduce climate ambition and revenue. Additionally, the document calls for the regulation of non-CO2 effects, which are estimated to multiply the global warming impact of aviation CO2 by 2-4 times.

The report argues that while the EU ETS has halved emissions in key sectors, it remains structurally oversupplied and hampered by free allocation subsidies. It advocates for the total elimination of free allowances, the expansion of the system to cover all international aviation and shipping, and the rejection of carbon offsets and removals. The document emphasizes that the Market Stability Reserve (MSR) must be preserved to maintain a strong carbon price signal and that revenues should be redirected from fossil fuel subsidies toward a 'people first' transition.

Carbon Market Watch argues that the Carbon Border Adjustment Mechanism (CBAM) must be implemented as a full alternative to free emission allowances to avoid market failures and incentivize industrial decarbonisation. The organization demands that the CBAM's scope be expanded to include bulk chemicals and indirect emissions, and that it provide special exemptions or support for Least Developed Countries (LDCs) and Small Island Developing States (SIDS). Furthermore, it advocates for the full earmarking of CBAM and EU ETS revenues for climate action, both within the EU and as international climate finance, while opposing the introduction of export rebates for EU companies.