EU ETS and CBAM review: Recommendations for accelerating the transition of Europe’s chemicals sector

The forthcoming review of the EU Emissions Trading System (ETS), together with the European Commission’s end-2027 review of the Carbon Border Adjustment Mechanism (CBAM), provides a critical opportunity to strengthen Europe’s carbon pricing framework while accelerating the transition to a competitive, fossil-free and circular chemicals sector.

This briefing sets out our initial recommendations for the EU ETS review and the future CBAM review. We have developed these recommendations drawing on the insights and discussions generated through our convenings on the future of the EU ETS, CBAM and chemicals decarbonisation, as well as the wider thinking and analysis emerging from civil society. They set out how the forthcoming legislative reviews can strengthen the environmental integrity of the EU’s carbon market while accelerating the transition to a fossil-free and circular chemicals sector.

The recommendations call for preserving a robust carbon price, strengthening conditionality and transparency for free allocation, strengthening benchmark methodologies, strategically investing ETS revenues, progressively expanding CBAM across the chemicals value chain, and preserving CBAM as a robust climate instrument. Together, these reforms would strengthen the polluter pays principle, provide long-term investment certainty and accelerate industrial transformation.

As this briefing has been prepared ahead of the publication of the European Commission’s ETS review proposal, it represents our initial position and will be updated following publication of the proposal to reflect the legislative text and support the subsequent negotiations in the European Parliament and Council.