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South Africa introduced a carbon tax in 2019 to meet greenhouse gas emission reduction targets of 34% by 2020 and 42% by 2025. The policy primarily targets the energy sector, which is responsible for approximately 80% of the country's emissions due to a heavy reliance on coal. While the tax aims to incentivize a shift toward renewable energy, it faces challenges including potential conflicts with WTO non-discrimination principles, the risk of carbon leakage due to a lack of border price adjustments, and negative socio-economic impacts such as increased consumer prices and potential job losses in energy-intensive industries like mining and steel. The document argues for a balanced approach that includes worker re-skilling, targeted incentives for renewables, and regional coordination through agreements like the AfCFTA to prevent protectionism and ensure a just transition.

A coalition of European civil society organisations urges the EU to align its Industrial Strategy with the 1.5°C Paris Agreement target, advocating for climate neutrality by 2040 and a 65% emissions reduction by 2030. The recommendations emphasize a transition to a circular economy, the phase-out of fossil fuel subsidies, and the prioritisation of renewable electrification over hydrogen and CCS. The authors call for a 'just transition' that protects vulnerable communities and workers through retraining and the exclusion of fossil fuel investments from the Just Transition Mechanism.

Carbon Market Watch argues that while the proposed EU state aid guidelines for indirect cost compensation under the EU ETS show improvement by reducing eligible sectors and requiring energy efficiency investments, they remain insufficient. The author contends that there is no evidence of carbon leakage to justify these subsidies, which cost nearly 1.2 billion Euros between 2017 and 2018, and argues that EU ETS auctioning revenues should be used entirely for carbon neutrality rather than being returned to industry.

The report identifies a trend of 'carbon leakage' where EU countries import electricity from non-EU 'offshore carbon havens'—specifically Turkey, Ukraine, Morocco, and the Western Balkans—that lack carbon pricing. Net imports into EU Emissions Trading System (ETS) countries rose from 3TWh in 2017 to 21TWh in 2019, with imported electricity emitting an estimated 26 million tonnes of CO2 in 2019. The document warns that up to 57GW of new coal power could be developed in connected or soon-to-be connected non-EU countries, potentially undermining EU emissions cuts. To address this, the authors propose a border carbon adjustment (BCA) for electricity imports to level the playing field for generators, protect low-carbon investments, and incentivise neighbouring states to adopt their own carbon pricing mechanisms.

The report finds that the EU ETS region is increasingly importing electricity from non-EU neighbors with high carbon intensities, effectively importing emissions and creating 'offshore carbon havens'. In 2019, the EU ETS region imported 26 million tonnes of CO2, with a net import of 20 million tonnes. The authors argue that the disparity in carbon pricing gives a competitive advantage to high-carbon generators in countries like Turkey, Ukraine, and the Western Balkans. To combat this, the report recommends a border carbon adjustment (BCA) on gross electricity imports to protect the integrity of EU climate policy and incentivize decarbonization in neighboring states. It also warns that planned increases in interconnection capacity (31% by 2030) and new coal power projects (up to 57GW) in connected non-EU countries will exacerbate the problem.

Feike Sijbesma, CEO of Royal DSM, advocates for the adoption of meaningful carbon pricing to drive private sector innovation and investment in clean technology. He notes that while some jurisdictions already use carbon pricing, current levels are often too low to be effective, suggesting that prices between $50-$100 per ton are needed by 2030 to meet Paris Agreement commitments. Sijbesma highlights that Royal DSM uses an internal carbon price of €50 per ton to future-proof growth and encourages governments to combine carbon pricing with net-zero 2050 targets and the removal of fossil fuel subsidies.

The document presents draft regulations for the Trade Exposure Allowance under section 10 of the Carbon Tax Act, 2019, in South Africa. These regulations establish a mechanism to provide transitional support to specific sectors and subsectors to mitigate the risk of carbon leakage and maintain industry competitiveness while implementing carbon pricing to meet Paris Agreement goals.

The production of basic materials accounts for approximately 25% of global CO2 emissions and 16% of EU GHG emissions. While industry commitment to carbon neutrality by 2050 is growing, current innovation funds and carbon pricing are insufficient to make climate-friendly technologies commercially viable. The Climate Friendly Material Platform proposes a policy package including a 'Climate Contribution' as an alternative to Border Tax Adjustments, Carbon Contracts for Difference (CCFDS), Contracts for Difference for Renewables, Green Public Procurement (GPP), and Product Carbon Requirements to stimulate investment and prevent the relocation of production to regions with less stringent climate policies.

The document asserts that carbon border taxes must be contingent on the removal of free pollution permits under the EU ETS to avoid double-protecting industry and to provide a real incentive for emissions reductions. It argues that carbon leakage is not evidenced and that free allocations have historically functioned as subsidies. The author suggests that border measures should be temporary, non-protectionist, and complementary to global climate policies, while advocating for the use of enforceable environmental chapters in trade agreements to drive global ambition.

The report argues that current carbon pricing and innovation funds are insufficient to transform the basic materials sector. It proposes a five-part policy package: a Climate Contribution to ensure full carbon cost internalisation, project-based Carbon Contracts for Difference (CCfDs) to hedge investment risks, Contracts for Difference (CfDs) for renewables to lower electricity costs, Green Public Procurement (GPP) to create lead markets, and long-term Product Carbon Requirements to phase out carbon-intensive materials.

The policy brief examines the interaction between the European Union's coal phase-out and the EU Emissions Trading System (EU ETS). It warns that closing coal plants without adjusting the ETS could create a 'coal bubble' of up to 6.18 billion excess permits by 2040, depressing carbon prices and undermining climate incentives. While the EU ETS supports the transition by making coal less profitable, the author argues it cannot deliver a full phase-out alone. The document recommends increasing the Market Stability Reserve (MSR) intake rate to 36% from 2024, increasing the Linear Reduction Factor to 4.2%, and allowing the cancellation of allowances for any closed ETS installation to maintain market effectiveness.

The authors analyze border carbon adjustments (BCAs) as a tool to prevent carbon leakage—the shift of emissions to regions with weaker climate policies—amidst a fragmented international climate architecture. While noting that improved emissions data and shifting trade dynamics create an opportunity for BCAs, the authors highlight ongoing risks regarding WTO compatibility and trade retaliation. The paper provides guidelines for BCA implementation to maximize climate benefits and minimize legal risks, though it concludes that BCAs are not a stable long-term solution for global climate action.

The document assesses the failure of the EU Emissions Trading System (EU ETS) to reduce emissions in heavy industry due to free pollution permits and inadequate sectoral plans. It proposes a transition based on electrification, circular economy models, and breakthrough technologies like hydrogen-based steelmaking, while calling for the phase-out of free allowances and the introduction of green public procurement.

The document criticizes the EU Emission Trading System (EU ETS) for granting excessive free pollution permits to heavy industry, citing court cases involving ArcelorMittal in Luxembourg and ExxonMobil in Germany as evidence of systemic abuse. It argues that lax 'carbon leakage' rules allow companies to profit from selling surplus permits while emissions remain stagnant, and advocates for a transition to a carbon-free industrial framework based on meaningful carbon pricing and innovation.

The report concludes that the Clean Development Mechanism (CDM) largely failed its objectives of producing high-quality, additional emission reductions and promoting sustainable development. It highlights systemic issues such as a lack of environmental integrity, perverse incentives for pollutant production, and the absence of social safeguards. Through four case studies in Uganda, India, Chile, and Guatemala, the document demonstrates how CDM projects led to land grabs, pollution, and the violation of indigenous and community rights. It recommends that post-2020 climate targets should not use CDM credits and that future mechanisms, such as the Sustainable Development Mechanism under the Paris Agreement, must incorporate binding stakeholder consultations and independent grievance mechanisms.

The report analyzes the HYBRIT process, which replaces coal with hydrogen for the direct reduction of iron ore combined with an electric arc furnace to create fossil-free steel. While technically feasible and potentially cost-competitive depending on electricity and carbon prices, the transition faces systemic barriers including high investment risks, the need for large-scale electrolysis infrastructure, and the risk of carbon leakage in a globally competitive market.

The production of basic materials, including cement, iron, steel, aluminium, and chemicals, accounted for approximately 25% of global CO2 emissions in 2014. The author contends that deep decarbonisation has been limited by a lack of knowledge regarding climate-friendly alternatives and a policy focus on carbon leakage risks. To overcome this, the brief identifies three primary policy gaps: incomplete incentives for recycling, a lack of short- and long-term markets for climate-friendly options, and missing signals regarding the phase-out of carbon-intensive production. Proposed solutions include green public procurement, project-based carbon contracts for difference (CfD), and a consumption charge on basic materials integrated into the EU ETS. The document emphasizes that the European materials sector is in a 'precarious limbo' where investment decisions over the next 10 to 15 years will determine whether assets are closed or transitioned to climate-friendly options.

The report identifies that the production of basic materials accounted for approximately 25% of global CO2 emissions in 2014, yet progress in decarbonisation has been modest due to carbon leakage concerns and limited political support for resource efficiency. It proposes a portfolio of seven mitigation options, ranging from sharing and reuse to low-carbon production processes. To unlock these, the authors identify three primary policy gaps: incomplete incentives for recycling, a lack of markets for climate-friendly options, and missing signals for phasing out carbon-intensive production. Recommended solutions include project-based carbon contracts for difference (CfDs), Green Public Procurement (GPP), and the introduction of consumption charges on carbon-intensive materials to reinstate carbon price signals muted by free allowance allocations in the EU ETS.

The research note analyzes California's consignment auctioning mechanism, where the government auctions free allowances on behalf of companies and returns the revenue to them. This hybrid approach is proposed as a solution for China's national ETS to enable price discovery and price collars while cushioning the economic impact on energy-intensive, trade-exposed sectors and bypassing institutional barriers regarding government revenue accounts.

The report identifies that while decarbonisation opportunities exist, they are hindered by a low EU ETS carbon price, restrictive product benchmarks, and a lack of shared infrastructure. Stakeholders argue that the current ETS design encourages incremental improvements over breakthrough technologies and often penalises early adopters or those using low-carbon substitutes. Proposed solutions include updating benchmarks with recent data, expanding green public procurement, and integrating carbon pricing with trade policy to ensure global competitiveness.