The European Commission has published a report on the draft implementing act concerning carbon prices paid in third countries under the definitive phase of the Carbon Border Adjustment Mechanism (CBAM).
The consultation gathered feedback from industrial stakeholders, governments, and companies regarding how foreign carbon pricing systems should be recognized within the CBAM framework.
Steel sector supports recognition of robust foreign ETS systems
Stakeholders broadly supported recognition of credible foreign carbon pricing systems, particularly mechanisms such as the UK Emissions Trading System (UK ETS) and China’s ETS.
However, many respondents from the steel sector emphasized that only explicit, verifiable, and effectively paid carbon costs should qualify for deductions from CBAM obligations.
EU steel industry stakeholders argued that indirect subsidies, hidden compensations, and energy taxes should not be recognized as deductible carbon costs under CBAM. According to respondents, allowing broad deductions could weaken the environmental integrity of the mechanism and distort competitiveness.
Preventing double charging remains major concern
Steel producers strongly emphasized the need to avoid “double charging” under CBAM.
Industry participants argued that carbon costs already paid under third-country emissions trading systems should be fully recognized to prevent carbon leakage and competitive distortions. At the same time, many EU-based steel stakeholders supported a conservative approach to deductions in order to preserve the effectiveness of the CBAM system.
Disagreements emerge over rebates and compensation
The consultation revealed significant disagreements regarding the treatment of rebates and compensation mechanisms.
EU stakeholders generally supported strict exclusion of rebates when calculating the effective carbon price paid abroad. By contrast, many third-country respondents argued for broader recognition of climate-related costs, taxes, and production-related charges.
Steel sector seeks practical documentation requirements
Regarding proof-of-payment obligations, steel industry stakeholders called for practical and standardized documentation systems.
Suggested forms of evidence included government-issued payment receipts, utility invoices, and certified ETS payment records. Respondents warned that overly complex reporting obligations could become difficult to manage across steel supply chains involving multiple suppliers and intermediate products.
“Effective carbon price” debate remains highly technical
One of the most technically sensitive issues involved the definition of the “effective price paid.” Stakeholders debated whether CBAM should recognize only direct ETS costs or also broader climate-related expenses linked to production.
Some respondents argued that the methodology should focus more heavily on actual emissions reductions rather than purely monetary carbon costs. Others proposed aggregation systems allowing several carbon-pricing instruments to be combined into a single recognized carbon price.
Voluntary carbon credits remain controversial
The report also highlighted disagreements surrounding voluntary carbon credits and Article 6 credits under the Paris Agreement. Some countries and industries argued that these credits should count toward CBAM deductions when integrated into national compliance systems.
However, other stakeholders opposed this approach, citing concerns over double counting, weak verification standards, and insufficient environmental integrity. Several respondents insisted that only officially regulated and government-mandated carbon pricing systems should qualify under CBAM.