The European Commission (EC) have been clear that the EU CBAM legislation will evolve throughout and beyond the current "transitional period" we are currently in until the 1st January 2026.
The EU is planning to assess and potentially expand coverage of the CBAM by 2030, aiming to include over half of emissions in the EU ETS sectors by the full phase-in of CBAM in 2034.
The EC have emphasised that the sectors covered by the EU CBAM are likely to expand. The above graphic outlines how the sectors that this expansion will look to capture.
Furthermore, the rules of the definitive period, from 1st January 2026 onward are yet to be defined by the EC. By the end of the transitional period of the CBAM (end 2025), the EC will undertake a full review of the implementation of the CBAM.
Using data collected during that period, the review will, amongst others, look carefully into the possibility of extending CBAM to other goods and sectors covered by the EU ETS at risk of carbon leakage (see Article 30(2) of the CBAM Regulation). An extension of the CBAM scope requires a legislative proposal from the EC followed by an amendment of the CBAM Regulation to be adopted by the European Parliament and Council.
Furthermore, other carbon border adjustment legislation is being proposed around the world.
United Kingdom
The government will implement a UK CBAM by 2027.
CBAM liability will lie directly with the importer of imported products within scope of the UK CBAM on the basis of emissions embodied in imported goods. This system will not involve the purchase or trading of emissions certificates.
Further details on the design and delivery of a UK CBAM will be subject to consultation in 2024.
The UK CBAM will place a carbon price on some of the most emissions intensive industrial goods imported to the UK from the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel sectors.
The UK CBAM will be applied to Scope 1, Scope 2 and select precursor product emissions embodied in imported products to ensure comparable coverage with the UK Emissions Trading Scheme.
United States
There is significant uncertainty regarding the progress of regulation associated carbon border adjustment mechanisms in the US. Presently, none of the below regulations will be enforced before at least 2026. There are four key regulations on the horizon that we are monitoring:
PROVE It Act - (R)/(D)
Emissions data gathering to open door for eventual CBAM
Foreign Pollution Fee Act (FPFA) - (R)
CBAM without domestic regulatory program to reduce emissions
Clean Competition Act (CCA) - (D)
CBAM with domestic regulatory program
MARKET CHOICE Act - (R)/(D)
Carbon tax system including CBAM
Australia
In March 2023, the Australian Government announced it would undertake a review of carbon leakage as part of the Safeguard Mechanism reforms and formally commenced on 1 July 2023.
The review’s first consultation was released on 13 November 2023 with submissions open until 12 December 2023. A second round of consultation will be undertaken in mid-2024.
The Review is due to report by 30 September 2024.
The design of any agreed policy options will take place after the review and could be part of the Australian Government’s Net Zero 2050 plan.