CBAM Downstream Extension, Anti-Circumvention Measures, and Electricity Rules
FEAD, representing the European private waste and resource management industry, supports an ambitious CBAM as an essential mechanism to prevent carbon leakage, strengthen the competitiveness of EU industry, and contribute to climate objectives.
The proposed extension of CBAM to downstream products is a necessary step to avoid unfair competition from non-EU manufactured goods that currently escape CO₂ pricing. Without such an extension, EU producers would remain exposed to imports of carbon-intensive goods whose embedded emissions are not subject to a carbon price, granting them a competitive advantage and risking the relocation of EU manufacturing capacity. Including downstream goods will help retain industrial activity in the EU, foster investment in cleaner production, and safeguard quality jobs.
Recycling in the EU, especially the recycling of plastics, is currently under considerable economic pressure. The cost of recycled materials ‘made in the EU’ is higher than the cost of recycled materials from third countries, including due to high energy costs resulting from CO2 pricing under the EU ETS. The CBAM could be an instrument to mitigate the distortion of competition in relation to third countries where there are no climate protection levies on energy equivalent to the EU ETS and where recycling is cheaper due to low energy prices, thereby avoiding carbon leakage in the recycling sector. To this end, the indirect emissions from recycling, i.e. the emissions associated with the production of the energy required for recycling, should be taken into account in the CBAM.
Imperatively, the inclusion of indirect CO2 emissions from recycled materials in CBAM must not lead to recycling in the EU being included in the EU ETS; the additional burden imposed by the EU ETS would further exacerbate the economic situation of recycling in the EU and further distort competition. Taking into account the emissions associated with the production of the energy required for the production of recycled materials from third countries would not require the inclusion of recycling activities themselves in the EU ETS, as the indirect emissions from recycling in the EU are already covered by the inclusion of energy in the EU ETS.
Furthermore, the Commission should also ensure that recycled materials are not disadvantaged by the CBAM compared to more CO2-intensive primary materials. This is notably the case for steel, where current CBAM benchmarks risk favouring imports of Direct Reduced Iron– Electric Arc Furnace long products over EU-produced Electric Arc Furnace steel made from recycled scrap. Such a distortion undermines the environmental integrity of CBAM and disadvantages EU recycling-based steelmaking, which delivers substantial CO₂ savings.
FEAD also recommends assessing the inclusion of certain textile products in the CBAM scope, as their production outside the EU generates significant CO₂ emissions and the resulting imports negatively affect the European textile recycling market.
In conclusion, FEAD calls on the Commission to assess whether CBAM could be an appropriate and meaningful measure to eliminate distortions of competition in the field of recycling between the EU and third countries, and to extend the mechanism to downstream goods where there is a clear risk of carbon leakage. These measures will ensure that CBAM supports both climate neutrality and the EU’s circular economy objectives while strengthening industrial competitiveness.
FEAD is the European Waste Management Association, representing the private waste and resource management industry across Europe, including 20 national waste management federations and 3,000 waste management companies. Private waste management companies operate in 60% of municipal waste markets in Europe and in 75% of industrial and commercial waste. This means more than 500,000 local jobs, fuelling €5 billion of investments into the economy every year. https://fead.be