A lack of clarity and guidance over the EU’s Carbon Border Adjustment Mechanism (CBAM) has undermined its policy objectives and created trade friction, panellists said during Friday’s CBAM summit in London organised by advisory firm Goyder and attended by Kallanish.
One panellist said CBAM was a “lighting rod issue” that had “galvanized the entire network” globally, rather than being an isolated regional trade issue. They noted CBAM could be a “powerful catalyst” for global carbon pricing but warned “the devil is in the details”, with not enough detailed guidance available.
They added that market participants were “operating in a very murky environment”, risking unnecessary trade friction which impedes and weakens the global supply chain.
“Ultimately, it undermines what is a very good policy objective,” they concluded.
A second panellist said that mistakes in CBAM’s implementation have resulted in paralysis as an industry reaction. They highlighted how many businesses have a “very limited understating of how substantially CBAM will change what they do”.
They added the “transitional period has been wasted” and warned that mid-size companies will suddenly find they have a bill to pay. Other companies will meanwhile not have taken CBAM seriously and will have entered deals they cannot make money on when they have to pay for CBAM certificates.
“There have been changes along the way and a lot of businesses say they expect there to be more change,” they noted. The panellist also said the EU should make clear that “enforcement is now real; this tax is here”.
“This isn’t theory, it’s practice,” said a third panellist who added there is an understanding at larger companies but this “gets foggier and foggier” as company size decreases. “The publication of outstanding information so that businesses have clarity is not there today. It needs to be published and it needs to be clear,” they added.
The second panellist queried why the data and learnings from the transition period had not been used by the European Commission for the default values. “The methodology does not rely on transitional period information,” they highlighted. This was “a big, missed opportunity to collect accurate data and learn lessons from it and that’s disappointing.”
They see this as a “chicken and egg” situation, where companies are very distrustful of data they are collecting as none of it has been verified. They also highlighted how communication from the European Commission had deteriorated from “extremely good” initially, with webinars organised, before drying up in late 2024. This came as the Commission “started fighting political fires and an enormous amount of climate regulations were scrapped”.
The participant also said the switch from quarterly reporting to annual was the “wrong step” which could lead to “incredible” cash flow swings.
“The Commission has created an absence of process,” they noted, meaning that getting actual values during the first year of CBAM will be “exceptionally difficult to do”.
However, a fourth panellist said that the EU’s recent simplification package was “a direct learning” and it was an ongoing process, with policymakers “open” to learning.
Carrie Bone UK
