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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 evaluates the Article 6 carbon market rules finalized at COP29. It finds that Article 6.2 provides a weak, decentralized framework with significant loopholes in additionality, permanence, and accountability. Article 6.4 is rated more robust due to its centralized Supervisory Body and structured transparency, though it still lacks sufficient safeguards for land rights and permanence. The author argues that the current framework is not robust enough to ensure high-quality carbon credits and warns developed countries against using these markets to meet their NDCs.

This report presents guidelines for designing Border Carbon Adjustment (BCA) mechanisms, based on global stakeholder dialogues. It offers specific recommendations on measuring embodied GHG emissions, determining sectoral coverage, managing revenues, and crediting foreign carbon prices. The guidance emphasizes 'parallel treatment' between domestic and foreign producers and suggests mechanisms to support small and medium-sized enterprises (SMEs) and developing countries in their low-carbon transition, while cautioning against blanket country exemptions to maintain the effectiveness of leakage prevention.

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.

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.

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).

The briefing identifies capacity constraints and policy incoherence as primary obstacles to implementing the European Green Deal in Sweden and Estonia, specifically regarding CBAM, EED, LULUCF, and JTF regulations.

The 2024 Independent Assessment finds that Canadian carbon pricing systems are effective, delivering between a third and a half of all projected emissions reductions by 2030. While systems have harmonized in coverage and stringency since 2020, some large-emitter trading systems (LETS) in Alberta, British Columbia, and Saskatchewan are at risk of losing effectiveness due to credit oversupply and adverse policy interactions. The report also notes that while LETS generally mitigate competitiveness risks for large emitters, small and medium-sized enterprises (SMEs) face varied exposure, with some sectors like water and truck transportation showing high vulnerability.

The 2024 independent evaluation finds that Canada's carbon pricing systems are effective, contributing between one-third and one-half of all projected emission reductions from climate policies by 2030. While systems are more harmonized than in 2020, the report warns that the rigor of some industrial exchange systems (SEGE) could erode by 2030 due to an oversupply of credits caused by overlapping policies. Coverage is broad, encompassing 77% of national emissions, though gaps remain in heating oil and agricultural fuels. Competitiveness risks for large emitters are generally mitigated through design features and subsidies, while small-to-medium enterprises (SMEs) face varying pressures, partially offset by new federal revenue recycling mechanisms.

The briefing outlines five essential characteristics for effective industrial carbon pricing in Canada: healthy credit markets, equity between companies, strategic revenue use, transparency, and policy certainty. It warns that current systems in several provinces are underperforming due to oversupply of credits and unfair performance standards, which could halve their effectiveness in reducing emissions if not addressed.

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 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 report provides a detailed analysis of the implementation of Carbon Border Adjustment Mechanisms (CBAMs) in the EU, UK, and Australia. It examines the transition from free allocations to border adjustments in the EU, the UK's planned 2027 launch, and Australia's ongoing carbon leakage review. Additionally, it tracks the evolution of multilateral discussions at the WTO, noting a shift from general concerns about protectionism toward specific technical cooperation and interoperability.

The report provides a comprehensive overview of carbon border adjustment mechanisms (CBAMs) as tools to prevent carbon leakage. It details the operational timelines and design features of the EU and UK mechanisms, analyzes a proposed Australian framework, and tracks legislative efforts in the US, Canada, and Taiwan. Additionally, it examines the evolving nature of CBAM discussions at the WTO, noting a shift from general concern toward specific design 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 document describes Canada's dual-track carbon pricing approach, distinguishing between consumer carbon taxes and industrial systems for large emitters. It details two primary industrial models—emissions-intensity based systems and cap-and-trade systems—and compares their application across different Canadian jurisdictions, highlighting the specific frameworks used in Alberta, Quebec, and the federal backstop system.

Canada employs a dual carbon pricing approach consisting of a consumer carbon price and an industrial carbon price for large emitters. To prevent carbon leakage and protect trade-exposed industries, Canada utilizes large-emitter trading systems (LETS), which primarily take the form of intensity-based systems or cap-and-trade. There are nine LETS across the country, including the federal output-based pricing system (OBPS) and Alberta's Technology Innovation and Emissions Reduction (TIER) Regulation, the latter being the largest due to Alberta's share of industrial emissions. Quebec operates the only cap-and-trade system in Canada, which is integrated with the Western Climate Initiative. The Northwest Territories uses a unique fuel levy with rebates rather than a trading system.

The document examines the challenge of carbon leakage, where carbon pricing in one jurisdiction drives emissions to others. It evaluates several policy responses: international carbon pricing frameworks, Border Carbon Adjustments (BCAs), carbon cost containment (such as free allocations in ETS), subsidies, and product standards. Each tool is analyzed based on its effectiveness in preventing leakage, its impact on decarbonization incentives, administrative complexity, and potential conflicts with WTO law or international principles like 'common but differentiated responsibilities'.

A joint letter from various organisations calling for a 'people first' approach to EU ETS revenues, recommending stricter earmarking rules to prevent fossil fuel lock-in, the phase-out of free allowances for polluters, and the expansion of the Social Climate Fund to protect vulnerable citizens from ETS2 costs.

The document examines the phenomenon of carbon leakage, where carbon pricing in one jurisdiction leads to increased emissions in others. It evaluates several mitigation tools, including Border Carbon Adjustments (BCAs), carbon cost containment measures (such as free allocations in ETS), subsidies, and product standards, while noting the political and practical hurdles of achieving a coordinated global carbon price.