Industry warns Brussels to keep offsets out of CBAM until ETS rules are settled

Industry warns Brussels to keep offsets out of CBAM until ETS rules are settled Norsk Hydro and others push back against mixing carbon credits into EU trade defences before compliance market decides. The EU carbon market should decide on offsets first, before lawmakers let them into the bloc’s border tax. That was the message from industry experts on Thursday (2026-05-21), as the European Parliament prepares to debate expanding the Carbon Border Adjustment Mechanism.² “There shouldn’t be anything new coming in under CBAM that you don’t have under the EU ETS now,” Sarah Hay, climate policy lead at Norsk Hydro, told a conference.² The timing matters. EU ETS revenues hit EUR 43.2bn in 2025, up 11%, according to the International Carbon Action Partnership.¹ That represents 62% of all global carbon pricing income. The system is generating serious money. But its design remains contested on several fronts, and the offset question cuts to the core of what the carbon price actually pays for. The EU ETS banned international offsets in 2013.³ Countries like Australia allow them inside their compliance schemes, but Europe took a hard line early, arguing that domestic emission cuts should drive the price signal, not cheap credits from forests or renewable projects elsewhere. Reopening that door under CBAM would risk undermining the integrity of both systems, critics say. The voluntary carbon market, by contrast, runs about $2bn a year.³ It is a rounding error next to the EU ETS. Yet the idea of linking the two is gaining attention in Brussels, particularly from lawmakers who see CBAM as a diplomatic lever to push trading partners toward Paris Agreement targets. A draft report from the European Parliament’s environment committee exists, though its details remain unclear.² Industry wants it parked until the ETS itself resolves whether, and how, offsets would fit into compliance. That review is ongoing, and it is controversial enough without adding CBAM into the mix. Italy has already urged the commission to scrap a planned revision to ETS benchmarks governing free allowances, arguing that moving ahead now would raise compliance costs for energy-intensive industries and weaken competitiveness.⁴ That plea came without offsets even being on the table. Adding them could further complicate an already fraught negotiation. Analysts at Veyt estimate that one ETS adjustment being considered by the commission could cut carbon prices by 13% over the next two years.⁵ That is a serious downside risk for a market already trading below EUR 80/tCO2. The ICE Endex EUA Dec-rolling contract settled at EUR 78.48/tCO2 on Thursday (2026-07-16). [LIVE_PRICES] The policy signal is clear. The commission is looking for ways to tweak the cap without breaking the system. But introducing offsets into CBAM before the ETS review concludes risks creating a two-tier compliance landscape — one regime for domestic emitters, another for importers. That would distort trade flows and add legal uncertainty for anyone sourcing materials outside the bloc. Traders watching the EUA calendar should note that when quotas exceed 833m tonnes, auction volumes are reduced by 24%.⁵ That mechanism has kept a floor under prices in recent years. But a 13% haircut from reform, combined with an offset debate that drags into 2027, could widen the bearish consensus that has dominated this market. The next signal to watch: whether the Parliament’s environment committee includes offset language in its CBAM draft, and how the commission responds. If Hay’s line holds — nothing in CBAM that is not in the ETS — the offset question stays parked. If it slips in, the market will have to price a credibility gap that has been shut for thirteen years.^2,3