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The report evaluates Carbon Contracts for Difference (CCfDs) as a financial instrument to reduce carbon-price risk for industrial companies in Germany, specifically within the steel, cement, and ammonia sectors. It finds that CCfDs can trigger investments in clean technologies at lower expected carbon prices than minimum carbon price schemes and can significantly reduce the net present value of government funding. The analysis suggests that combining CCfDs with other risk-reducing instruments, such as contracts for difference for renewable electricity, further lowers the necessary strike price. The report also discusses award mechanisms, arguing that negotiations may be superior to auctions for complex innovative projects to avoid 'low-balling' strategies and overcompensation.

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 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 document examines how carbon pricing affects different household income levels across developed and developing countries. It argues that while carbon pricing can be regressive—disproportionately impacting low-income households who spend more of their income on energy—these effects can be neutralized or turned into net benefits through strategic revenue recycling, such as lump-sum rebates or targeted subsidies. The briefing highlights that in very low-income countries, carbon pricing can actually be progressive due to limited fossil fuel access among the poorest. It provides case studies from the EU ETS, the US Regional Greenhouse Gas Initiative (RGGI), South Africa, and Iran to illustrate various implementation and mitigation strategies.

The report argues that traditional economic tools, such as cost-benefit analysis and equilibrium models, are inadequate for the structural changes required by the energy transition. It proposes a shift toward 'Risk-Opportunity Analysis' and dynamic modelling that accounts for induced innovation and learning-by-doing. Based on successes in solar PV, LED lighting, and wind power, the authors outline ten principles for policymaking, emphasizing targeted investment, risk management, and adaptive policy packages. National case studies in Brazil, China, and India suggest that while decarbonisation has a negligible impact on overall system costs and GDP, the transition requires significant up-front investment and careful management of distributional impacts, particularly in coal-dependent regions.

Indonesia faces significant structural barriers to achieving net-zero emissions by 2060, including an unstable policy environment, inconsistent signals regarding fossil fuel subsidies, and a lack of coordinated strategy across sectors. The country requires approximately $200 billion annually for its climate agenda, yet domestic public budget contributions from 20152020 averaged only $4.5 billion. To address these gaps, the briefing suggests three key interventions: the use of blended finance to de-risk renewable energy projects like geothermal power, the operationalization of 'Just Transition' principles through the Indonesia Just Energy Transition Partnership (INO-JETP), and the implementation of multi-level coordination mechanisms to engage sub-national governments and standardize greenhouse gas reporting.

Ghana is navigating a contradictory energy landscape where the government pursues both petroleum exploration and a net-zero target by 2070. While the National Energy Transition Framework (2022-2070) outlines a path toward decarbonization, the country's energy mix remains heavily dependent on oil and gas, which provided 64.1% of the energy supply as of April 2024. The transition is complicated by a top-down technocratic approach that has led to public resistance against policies like the ban on salvaged vehicles and carbon levies on petrol and diesel cars. Furthermore, there is a tension between domestic desires to utilize all available fossil resources for economic growth and global donor-driven pressures to accelerate the phase-out of hydrocarbons. The document recommends operationalizing a National Energy Transition Fund, improving procedural justice through public engagement, and harmonizing donor engagement to ensure a more equitable transition.

The briefing argues that while the transition away from fossil fuels is accelerating due to economic costs, clean energy opportunities, and geopolitical drivers, significant gaps remain in production and emissions. It highlights the vulnerability of fossil-fuel-dependent nations and the need for a 'globally just transition' supported by redirected finance, debt relief, and stronger governance to avoid economic disruption and systemic financial risks.

The paper argues that for India to achieve net-zero emissions by 2070, the iron and steel sector—responsible for 10-12% of national GHG emissions—must shift to low-carbon production. It proposes a comprehensive 'Green Steel Mission' and a national sustainable finance taxonomy to bridge the gap between conventional and green technologies. The authors emphasize the need for differentiated strategies for primary steel (BF-BOF route) and secondary steel (DRI-IF/EAF route), noting that secondary producers face higher financing barriers despite having high near-term abatement potential. Key recommendations include mandating corporate transition plans, developing a detailed sectoral technology roadmap, and adopting innovative financial instruments like Carbon Contracts for Difference (CCfD) to support low-TRL technologies.

The document provides a framework for governments to assess how climate policies affect national budgets, focusing on the production side of fossil fuels and infrastructure. It details a five-step methodology: establishing a base case, developing scenarios, assessing policy impacts, allocating value between consumers and producers, and splitting value between government and commercial entities. The report applies this to Russia, Kazakhstan, Azerbaijan, and Egypt, highlighting that oil assets are most sensitive to global demand shifts, while coal and gas are more influenced by regional dynamics and infrastructure. It recommends that governments reduce upfront capital commitments, adapt tax regimes, and diversify into low-carbon technologies to mitigate the risk of stranded assets.

The report analyzes the shift from stalled global climate negotiations toward national and subnational policy actions. It examines sectoral emissions drivers and the effectiveness of various policy instruments—including carbon pricing, renewable energy mandates, and energy efficiency programs—across Brazil, China, the EU, India, and the US, while emphasizing the role of innovation and finance in achieving low-carbon growth.

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.

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.

The report argues that carbon pricing is a vital but insufficient tool for climate action and must be integrated into a broader policy mix. It advocates for absolute emission caps, the elimination of free allowances, and the reinvestment of revenues into public climate benefits. The document strongly warns against the use of carbon offsets and credits, which it claims undermine environmental integrity and allow polluters to avoid real reductions. It also addresses the 'carbon leakage' myth, suggesting that the risks are often overestimated and used to justify policies that lock in polluting industries.

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.

The document claims that the steel sector is projected to receive €49 billion in pollution subsidies between 2021 and 2030, based on an average carbon price of €25/tCO2, and notes a further claim by the industry for €4 billion for waste gases.

The report by Carbon Market Watch outlines a framework for 'carbon pricing done right,' arguing that such systems must be integrated into broader policy packages and based on strict emission caps to be effective. It emphasizes the 'polluter pays principle,' warning against free allocations and offsets, which it claims can weaken price signals and lead to greenwashing. The document advocates for transparency, the reinvestment of revenues into climate action and vulnerable communities, and a cautious approach to carbon leakage and border adjustment mechanisms to avoid protectionism while ensuring climate justice.