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Policy Focus
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Policy Focus
In brief
The EU Emissions Trading System (EU-ETS) is the cornerstone of the European Union’s climate policy. It works on a cap and trade principle: within a fixed cap, installations receive or buy emission allowances which they can then trade with one another as needed. At the end of each year, companies must surrender enough allowances to cover their emissions.
The EU ETS introduced, unilaterally, the concept of CO₂ costs for energy-intensive industries such as cement. Since the start of the system in 2005, the fact that European producers face CO₂ costs while non-EU competitors do not has triggered the need for carbon leakage protection. To address this, eligible sectors receive free allocations up to a strict benchmark.
Phase IV of the EU-ETS began in 2021. From January 2026, the second part of this phase will see the implementation of the Carbon Border Adjustment Mechanism (CBAM). For the cement industry, CBAM will gradually replace free allocation, in a move designed to create a fairer playing field between EU and non-EU suppliers.
Our view
Cement Europe considers the EU ETS changes of 1 January 2026 to be particularly challenging. Free allocations will no longer be based on clinker, but on a new, unclear binder concept, while CBAM will be introduced at the same time. Looking further ahead, the mid- and long-term future of the ETS also remains uncertain, as the 2040 climate target is still under debate.
The EU’s climate ambitions are clear, but they will put significant pressure on the cement industry. That is why the implementation of a watertight CBAM is essential to ensure a fair level playing field on CO₂ costs between producers in the EU27 and those outside the EU.
Decarbonising our industry will require massive efforts, not only technological but also financial. Cement Europe therefore calls for the benefits generated by the EU ETS and CBAM to be channelled back into the sector, helping to make the necessary investments feasible.
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