The rollout of the EU’s CBAM has recently driven a great deal of criticism, as the European Commission has been slow in delivering key implementation details. CBAM benchmarks are one of the missing pieces that is driving a great deal of consternation for importers and third country producers. Without these values, industrials within the scope of the CBAM Regulation have little visibility as to what costs they will face as the border levy enters its ‘definitive phase’ in 2026.
The plan, as announced by the European Commission, is to release ‘provisional CBAM benchmarks’ in Q4 2025 and the final values in Q1 2026. The delay is due to the ongoing, parallel process by which the Commission is determining the new EU ETS benchmark values for 2026-2030, also scheduled for release in Q1 2026.
CBAM benchmarks will determine the portion of emissions exempt from carbon costs. These values are intended to mirror the product-level benchmarks that set the coverage of free allocation under the EU ETS.
Benchmarks are one of the key elements of the formula that determines how much free allocation an industrial installation receives. The ETS benchmark values are determined based on the emissions intensity of the 10% most efficient installations. Initial benchmark values were established in 2008, with subsequent benchmark updates determined based on industrial progress towards improved emissions intensity and policy-determined minimum and maximum reduction rates. These minimum and maximum rates were set at 0.3% and 2.5% respectively during the last EU ETS reform process.
For the current update process, the actual emissions intensity for best performers in 2023 has been determined through a data gathering process. A line is drawn between the initial 2008 benchmark and the 2023 actual values, the slope of which is used to extrapolate out to 2028. If this extrapolated value falls between the minimum and maximum values described above, it becomes the new benchmark (see Figure 2). If it falls outside that range, then either the minimum or maximum threshold becomes the benchmark.
The CBAM benchmarks are intended to provide the same relative protection from a carbon price on imports as free allocation does for industrial production within the EU. As such, they must be as close to the EU ETS benchmarks as possible. This presents a difficult conundrum for policymakers, as the EU CBAM products are determined at a HS code level (Harmonised System, used for classification of trade products), whereas the ETS benchmarks are much broader and not strictly tied to product codes.
In order to estimate benchmark values, we first established estimates for ETS benchmarks. Then we used these values and estimated per-HS code average values from the Joint Research Council to estimate CBAM benchmarks.
For the EU ETS benchmarks, we have used a multi-tiered approach. First, if the actual values for the years 2016 and 2017 (from the 2021 update) were outside of the new min/max range, the minimum or maximum value was used as appropriate.
Second, in order to provide a conservative estimate, we assume that the efficiency rate observed in 2016-2017 remains the same until 2023. Under this premise, if the extrapolated value in 2028 falls within the min/max range, this value is used. If the extrapolated value is higher than the current benchmark, we assumed that the benchmark value remains at the same level as the 2021 update.
A few benchmarks have their own rules. For example, the hot metal benchmark uses the minimum reduction rate from the 2021 update (0.2% per year rather than 0.3%). Similarly, the synthesis gas benchmark is reduced at the same rate as the refinery benchmark rather than following the standard methodology. See Figure 3 for an overview of changes to benchmark levels by sector.
The mismatch between ETS benchmark values and the classification of CBAM products requires some broad estimates to be made.
In order to translate the EU ETS benchmarks to CBAM benchmarks, we first established the percent difference between the estimated ETS benchmark values and the average EU emissions intensity reported in the 2021 ETS benchmark update. This difference is then applied to the Joint Research Council’s estimates for the EU’s per-product average emissions intensity to arrive at a per-product CBAM benchmark estimate.
Please find our ETS and CBAM benchmark estimates in the files below.
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