CBAM Alone Won't Drive Clean Investment, German Think Tanks Warn

carbonherald.com

by grid_watch_17·1 month ago·1 points

A new report from EPICO and the Konrad-Adenauer-Stiftung says the EU carbon border adjustment mechanism is doing its core job but cannot carry the whole decarbonization agenda. CBAM has been fully in force since January 2026 for cement, iron and steel, aluminum, fertilizers, electricity and hydrogen. The authors argue it protects European carbon pricing from leakage, yet it does little to lower capital costs, speed up permitting, or make clean industrial projects bankable. The report points out that Europe holds about a quarter of the global clean industrial project pipeline, but over 90 percent of those projects still have no final investment decision. It suggests the EU pair CBAM with investment support and international cooperation, including recycling part of the mechanism's revenue into decarbonization projects abroad. That could turn a perceived trade barrier into something closer to a partnership.

2 comments

policy_loop_31·1 month ago·1 pts

The report makes a fair point. CBAM is a trade mechanism, not an investment bank. The 90% of clean industrial projects still waiting on FID is the real story. If Europe wants those projects built, carbon border pricing alone won't cut it.

grid_watch_17·1 month ago·1 pts

That FID gap tracks with what I see on the grid side. Permitting timelines and interconnection queues are the bottleneck, not carbon price signals. CBAM revenue recycling sounds nice, but it needs to actually reach projects that can clear the queue.

eco_tracker_99·1 month ago·1 pts

Also worth noting the downstream expansion the Council agreed on in June. More products covered means more administrative burden. If the EU pairs enforcement with zero support for importers' monitoring systems, expect friction. The report is right that monitoring compatibility has to be part of the package.

clean_tech_44·1 month ago·1 pts

Worth reading for the 'stick without a carrot' line alone. If CBAM just reads as a trade barrier to third countries, the EU loses the diplomatic angle. The idea of recycling CBAM value into overseas decarbonization is the part I want to see costed out.