Perspicacious Pleas Prompt Policy Precision

Aurora D’Aprile, EU policy officer at the International Emissions Trading Association, has strongly urged European institutions to act promptly to finalise the outstanding delegated and implementing acts under the carbon border adjustment mechanism, known as CBAM. “We strongly encourage the European institutions to fast track the implementing acts, and the recognition of how to calculate and to recognize the carbon price paid in third countries,” D’Aprile explained during an interview with Platts, part of S&P Global Commodity Insights. This clarity, she noted, is critical so that global businesses can adjust strategies before CBAM’s definitive phase starts in 2026.

Fragmented Framework Fuels Fiscal Friction

IETA’s report, published on June 26, identified global fragmentation as a significant challenge in carbon pricing. D’Aprile described the market as “a very fragmented, fast-paced space,” warning that different national systems and the speed of policy changes risk making cross-border trade increasingly complex, unpredictable, and costly. “The risk is that operating globally is going to become more and more complex and uncertain, and costly, due to fragmentation,” she emphasised, underscoring that while CBAM has encouraged the evolution of emissions trading systems worldwide, inconsistency still threatens economic efficiency and climate progress.

Judicial Jousting Jolts Justifications

In May, Russia formally challenged the EU’s CBAM and emissions trading system at the World Trade Organization. Russia claimed the measures are “discriminatory” and “do not concern a genuine environmental measure.” Reflecting on this, D’Aprile noted, “The decision by Russia to revert this issue to the WTO is of key relevance,” highlighting the geopolitical complexity CBAM faces beyond climate policy alone. This legal dispute risks further complicating trade relations and increasing uncertainty for European and global businesses operating across borders.

Calculative Clarity Catalyses Carbon Cost Control

A core challenge remains how importers can offset CBAM costs through carbon prices already paid in the countries of origin. The CBAM regulation allows reductions in certificates that importers must surrender, equivalent to verified carbon costs paid abroad. However, the European Commission has yet to finalise how these costs should be calculated and recognised. D’Aprile stressed, “This is a central element of key importance for all the businesses that operate globally and will have to consider this to assess their strategies and their liabilities.” Clarity here, she argued, is vital for companies to plan investments and supply chains.

Transitional Thresholds Temper Trade Turbulence

CBAM’s transitional phase, from October 2023 until December 2025, only requires importers of carbon-intensive products, such as iron and steel, cement, aluminium, hydrogen and electricity, to report embedded greenhouse gas emissions. Companies must begin purchasing CBAM certificates from February 2027 to cover goods imported in 2026. To calculate these certificate prices, the EU will initially use a quarterly average of EU Allowance prices, later moving to a weekly average. According to Platts, the weekly average price of EU Allowances for December 2025 delivery stood at €70.71 per metric ton CO₂e, or about $82.66 per metric ton CO₂e, as of July 11.

International Incentives Inspire Integrative Ideas

Currently, CBAM rules allow deductions only for compliance carbon schemes, like national emissions trading systems or carbon taxes. They exclude international credits issued under Article 6 of the Paris Agreement. D’Aprile welcomed recent EU amendments allowing the limited use of high-quality international credits toward the bloc’s 2040 climate targets, describing this as a “positive signal.” Yet, she emphasised, “The role of international credits is something that IETA encourages to be put into the discussion,” arguing they should eventually help reduce CBAM obligations and better reflect real carbon costs.

Synergistic Strategies Shape Sustainable Solutions

Other countries are exploring mechanisms aligned with Article 6. Singapore and Japan, for example, have launched initiatives to trade Article 6.2 carbon credits. Japan’s Joint Crediting Mechanism applies bilateral standards approved by its partners. D’Aprile observed that because EU trade partners are considering Article 6 in compliance systems, this topic will likely become part of CBAM discussions. “This is something that may, in the future, enter into the conversation, but as of now, the priority should be how to recognize the carbon price effectively paid,” she said, insisting on immediate clarity so that businesses can adapt without undue risk or cost.

Key Takeaways

• IETA urges EU institutions to swiftly finalise CBAM rules, especially on recognising carbon prices paid abroad.

• CBAM has sparked global carbon pricing debates but faces WTO disputes, notably with Russia.

• Article 6 international credits may play a future role in CBAM, though they’re currently excluded.