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The document argues that the EU ETS1 is fit for purpose until 2035, after which a supply-demand mismatch for allowances may emerge. It strongly warns that integrating international carbon credits (Article 6) or carbon removals into the ETS would undermine the carbon price incentive, risk emissions mitigation avoidance, and divert investment away from domestic decarbonisation. For the upcoming ETS2, the brief recommends allowing the market to function for several years before making adjustments due to high price uncertainty. It also cautions against merging ETS1 and ETS2 due to differences in market actor price sensitivity and suggests maintaining national targets beyond 2030 to support the ETS.

The report calls for the EU to adopt a 2035 NDC target of at least 72.5% emissions reduction, aligning with a straight-line path toward a 90% reduction by 2040 and net zero by 2050. It emphasizes that a robust, investible target, supported by the Clean Industrial Deal and sectoral policies in energy, transport, and industry, will reduce dependence on fossil fuel imports—which cost the EU EUR 376 billion in 2024—and enhance global competitiveness. The authors advocate for a 'competitive sustainability' approach and strengthened public-private collaboration, citing models from Denmark, Sweden, and the Netherlands to accelerate the transition.

The case of Fridays for Future Estonia v. Eesti Energia involved a legal battle led by the NGO MTÜ Loodusvõlu to stop the construction of the ENEFIT282 shale oil plant in Narva-Jõesuu. The claimants argued that the plant violated the Paris Agreement, EU climate neutrality goals, and the UN Sustainable Development Goals, while also posing risks to Natura 2000 conservation areas. After several rounds of litigation and rejected requests for interim relief, the Supreme Court of Estonia cancelled the construction permit in October 2023. The Court found that the project's environmental assessments failed to identify impacts on climate change and the conservation of the Puhatu bird, necessitating the cancellation under the precautionary principle.

The document argues that Central and Eastern European (CEE) countries must implement coordinated national and regional strategies to decarbonise heavy industries like refining and ammonia production. It identifies four priority actions: cost-competitive policy design, targeted deployment in industrial clusters, shared financial risk schemes, and cross-border collaboration for infrastructure. The analysis highlights that CEE accounts for nearly 25% of EU hydrogen consumption, with Poland as the dominant user, and emphasizes that the lack of domestic regulatory frameworks for CO2 storage in Poland currently forces a reliance on more expensive export options.

The report analyzes how the EU's Carbon Border Adjustment Mechanism (CBAM) affects Guangdong province, a major hub for iron, steel, and aluminium exports. While initial exposure is limited, the report warns that pressure will increase as CBAM expands. It recommends that Guangdong accelerate industrial decarbonization—specifically through electrification and green hydrogen for steel and renewable energy for aluminium—and establish a carbon pricing system compatible with the EU Emissions Trading System (ETS). Additionally, it suggests that EU policymakers enhance dialogue on emissions accounting, allocate CBAM revenues to support climate action in developing economies, and engage in international platforms like the Climate Club.

Carbon Market Watch warns that the European Commission is considering "loopholes" to weaken the EU's 2040 climate target, including the use of international carbon credits and carbon removals. The organization argues that such measures would undermine domestic emissions reductions, repeat past failures of the EU Emissions Trading System, and contradict the recommendations of the European Scientific Advisory Board on Climate Change, which suggests a 90-95% emissions cut through domestic action alone.

Carbon Market Watch defends the independence of environmental NGOs receiving EU LIFE programme funding against allegations from some Members of the European Parliament that these organisations act as unofficial mouthpieces for the European Commission. The organisation highlights the vast disparity between the €15 million annual LIFE funding for NGOs and the €1.3 billion spent by corporate lobbyists in 2023, asserting that such grants are vital for balancing the playing field without compromising the NGOs' role as watchdogs.

The report argues that the Korean Emissions Trading Scheme (K-ETS) is undermined by a reliance on low-quality international carbon credits, which lead to over-crediting and depressed carbon prices. Using the EU ETS as a benchmark, the authors demonstrate how the EU phased out international credits to prioritize domestic reductions. A specific analysis of cookstove projects eligible for K-ETS finds they likely overestimate emission reductions by a factor of 18.3. The report also highlights systemic issues with hydropower and gas leak reduction projects, including lack of additionality and environmental harm. It recommends that South Korea ban international credits from the K-ETS, strengthen emission caps, and avoid using unreliable bilateral cooperation projects under Article 6.2 of the Paris Agreement to meet its 2030 Nationally Determined Contribution (NDC).

Carbon Market Watch warns that watering down the EU ETS and Sustainable Aviation Fuel (SAF) mandates in response to airline industry pressure would increase emissions and undermine EU clean tech competitiveness. The author calls for extending SAF funding to 2040, expanding the EU ETS to all departing international flights, and implementing penalties for fuel suppliers who fail to meet SAF targets.

The document analyzes proposed EU amendments to the Carbon Border Adjustment Mechanism (CBAM) intended to simplify compliance for EU importers. While the briefing notes that changes to the scope and payment timing may have minimal material impact on African exporters, it warns that modifications to 'default values' for embedded emissions and carbon pricing could negatively affect exporters. Specifically, the shift toward global averages for the most carbon-intensive countries rather than EU-specific benchmarks may increase costs for African producers lacking reliable data. The report concludes that the amendments primarily benefit EU importers and may penalize African exporters who lack the administrative capacity to provide actual installation data.

The report argues that the EU's initial hydrogen targets were overly ambitious and calls for a pragmatic shift toward 'hard-to-electrify' sectors. It identifies a significant gap between current production (0.02 Mtpa) and 2030 targets, projecting regulated demand between 2.2 and 2.8 Mtpa. The authors advocate for a 'carrots and sticks' approach—combining subsidies with enforceable RED III mandates and penalties—to drive offtake. Financially, the report estimates that €13.9 billion in public funding is needed to meet mandates, potentially rising to €45.6 billion under an Accelerated Transition Scenario, which could unlock €276 billion in private investment.

The report examines non-CO2 aviation effects, specifically contrails, which contribute to surface warming at a rate potentially similar to CO2 emissions. It evaluates three primary mitigation strategies: reducing aromatics in conventional fuel, increasing SAF adoption, and implementing flight path deviations to avoid ice-supersaturated regions (ISSR). While fuel hydrotreatment can reduce soot, the report warns that the energy-intensive process may increase CO2 emissions, potentially offsetting climate gains. SAF is presented as a more effective long-term solution, with targeted use on high-impact flights offering 9-15 times the benefit of low-level global blending. Operational mitigation via AI and satellite-based re-routing shows promise, though it faces challenges from air traffic congestion and weather forecasting inaccuracies. The document concludes that a combination of these technologies and specific non-CO2 policies is necessary to reduce the sector's total climate impact.

Carbon Market Watch urges the European Union to revise its proposal for a global shipping carbon levy before the April 2025 IMO negotiations. The organization argues that the current plan lacks sufficient support for least developed countries (LDCs) and small island developing states (SIDS), who are most vulnerable to increased shipping costs. It recommends that the EU expand revenue use beyond the maritime sector, allocate more funds to vulnerable nations for climate adaptation and resilience, and establish transparent redistribution mechanisms to ensure a just transition.

The report argues that the EU ETS continues to reward heavy polluters through free allowances, which in 2023 alone amounted to approximately 40 billion euros. It highlights that sectors like steel, cement, and chemicals often receive more allowances than they emit, reducing the incentive for decarbonisation. The authors critique the Innovation Fund for over-financing carbon capture technologies (CCS/CCU) rather than scalable zero-emission technologies. To accelerate the transition, the report recommends phasing out free allowances by 2030, fully implementing the Carbon Border Adjustment Mechanism (CBAM), and reforming the Innovation Fund to prioritise material savings and renewable energy solutions.

The document analyzes how international agreements, regional legislation, and industry competition hinder the removal of fossil fuel subsidies in aviation and shipping. It argues that while fuel taxation is often restricted by bilateral agreements or regional directives like the EU's Energy Taxation Directive, emissions levies through the ICAO and IMO offer viable pathways to reduce greenhouse gas emissions and fund the transition to sustainable fuels.

The report examines the implementation of the EU and UK Carbon Border Adjustment Mechanisms (CBAMs) and the preliminary findings of Australia's Carbon Leakage Review. It highlights the shift from free allocation of emissions permits to border adjustments to prevent carbon leakage, where emissions reductions in one country are offset by increases elsewhere. The EU CBAM is set for full implementation by 2026, and the UK CBAM by 2027. Australia is considering a BCA as a 'robust underpinning' to its Safeguard Mechanism. The document also analyzes WTO discussions from 2020 to 2024, noting a transition from general concerns about protectionism and WTO compliance toward specific discussions on cooperation and interoperability.

The document argues that Central and Eastern European (CEE) countries are heavily reliant on carbon-intensive heavy industries but possess significant potential for clean industry due to renewable energy resources and carbon dioxide storage. It calls for EU industrial policy to shift toward a place-based approach that supports countries with high deployment potential regardless of their current innovation track record. Key recommendations for the EU include revising the Public Procurement Directive to include lifecycle emissions and redesigning the Innovation Fund for first-of-a-kind national deployments. For CEE national governments, the statement recommends earmarking EU ETS revenues for climate action, implementing Carbon Contracts for Difference, and conducting integrated infrastructure planning for hydrogen and carbon dioxide transport.

The report details how petrochemicals, primarily plastics and nitrogen fertilizers, drive fossil fuel demand and contribute to a 'triple planetary crisis' of climate change, biodiversity loss, and pollution. It highlights the significant health risks to workers and communities, particularly in Europe's Trilateral Chemical Region, and criticizes EU policy for prioritizing industry 'competitiveness' and speculative technologies like carbon capture over a phasedown of production.

The policy brief proposes that Cyprus leverage its unique island profile and Mediterranean position during its 2026 EU Council Presidency to advance EU-level action on water scarcity, climate adaptation, energy security, and transport decarbonisation. Key recommendations include establishing a Mediterranean Resilience Summit, a Water & Climate Security Forum, and an EU-SIDS Compact 2030, while steering legislative processes such as the Energy Security Framework and ETS revisions to support affordability and resilience.

The report evaluates the integration of permanent carbon removals—specifically BioCCS and DACCS—into the EU ETS. It identifies a critical tension: while direct integration can drive deployment and maintain market liquidity as the emissions cap approaches zero, it risks 'abatement deterrence' where removals substitute for necessary emissions reductions. The authors warn that without supply controls, BioCCS deployment could exceed sustainable biomass limits, potentially harming biodiversity and LULUCF carbon sinks. To mitigate these risks, the report recommends a gradual integration strategy that maintains the gross emissions cap, implements technology-specific supply controls, and introduces differentiated allowances. It also emphasizes that the EU ETS alone is likely insufficient to incentivize high-cost technologies like DACCS or to achieve net-negative emissions post-2050, necessitating additional public funding tools and long-term policy frameworks.