Public Consultation Opens on CBAM Scope Expansion
Commission launches CBAM expansion consultation, export carbon leakage mechanism expected by the end of 2025, domestic carbon removals proposed for inclusion in the EU ETS, Turkey passes Climate Law establishing national ETS.
At a Glance
- Public Consultation Opens on CBAM Scope Expansion
- CBAM Export Solution Expected Before the End of 2025
- Commission Proposes Inclusion of Carbon Removals in EU ETS
- Turkey Adopts First-Ever Climate Law Establishing National ETS
Public Consultation Opens on CBAM Scope Expansion
The European Commission, as part of its European Steel and Metals Action Plan, announced an initiative to expand the scope of the Carbon Border Adjustment Mechanism (CBAM) to include certain downstream products, aiming to further reduce the risk of carbon leakage.
In this context, it has launched a public consultation on the policy design of CBAM's potential downstream scope extension, anti-circumvention measures, and rules for electricity, as well as on their potential social, economic, environmental, and administrative impacts.
Stakeholders from both within and outside the EU are invited to submit feedback on the proposed measures and their implications until late August.
CBAM Export Solution Expected Before the End of 2025
In its Delivering on the Clean Industrial Deal I communication, the European Commission announced plans to propose a dedicated mechanism by the end of 2025. The initiative would use revenues generated by CBAM—which is expected to be extended in scope—to support production at risk of carbon leakage.
This would allow the affected producers to be compensated proportionally to the phasing out of the free allowances, subject to deliverables on long-term decarbonisation. The scope of the scheme will be defined based on objective criteria and is intended to operate for a fixed initial period, with a review planned for 2027.
This announcement comes amid calls from various CBAM sectors for urgent action to address export carbon leakage. The risk of carbon leakage in the production of CBAM goods for export markets may increase as free allocation is phased out, especially if certain third countries do not introduce equivalent carbon pricing.
Commission Proposes Inclusion of Carbon Removals in EU ETS
On July 2nd, the European Commission proposed an amendment to the EU Climate Law, aiming for a 90% reduction in net greenhouse gas (GHG) emissions by 2040 compared to 1990 levels.
The proposal includes allowing the use of domestic permanent carbon removals within the EU Emissions Trading System (EU ETS), providing additional flexibility for operators to meet their carbon pricing obligations.
The proposal will now be submitted to the European Parliament and the Council for discussion and adoption through the ordinary legislative procedure.
Turkey Adopts First-Ever Climate Law Establishing National ETS
Turkey's Parliament has passed its inaugural Climate Law, creating a comprehensive legal framework to combat climate change and introducing a national ETS.
Companies covered by the ETS will be required to purchase greenhouse gas emission permits within three years of the regulation's entry into force, with a possible extension of up to two years if deemed necessary.
Before full implementation, the scheme will begin with a pilot phase during which fines for non-compliance will be reduced by 80%. The scope, duration, and procedures of this phase are yet to be determined by the Carbon Market Board, which will be responsible, among other things, for determining the allocation of allowances and implementing related policies.
Planning Ahead: Navigating CBAM's Definitive Phase
As global supply chains face increasing scrutiny under new environmental policies, stakeholders across the supply chain must prepare for the definitive phase of the EU CBAM starting in 2026, to support readiness, we’ve published a practical guide outlining the definitive phase of CBAM, who it affects, key timelines, and how companies can prepare.