💥 Breaking: New CBAM rules could supercharge demand for Article 6 credits

🇪🇺 Huge news coming out of Europe this week! The European Commission released a draft implementing act for the Carbon Border Adjustment Mechanism (CBAM) covering the use of carbon credits.

🔎 The punchline: Europe is looking to allow up to 10% of international carbon credits (Article 6) and what looks like unlimited domestic compliance carbon credits to be used to reduce CBAM levies for companies exporting to Europe.

💶 Why is this so big? Let’s do the maths: the CBAM - currently covering six sectors - is expected to generate up to €30b in levies. In future, as the cost of carbon in the EU ETS increases and more sectors are included, this number is only going to increase.

😍 Now imagine if 10% of that went straight into carbon projects? That is a >€3b compliance market opening up. The math is a bit more complex, as the cap is on reported emissions not levies, but this is directionally correct.

🌊 And this would just be the start: one of the objectives of the CBAM is to lead to the creation of ETSs and more CBAMs around the world, something we are already seeing. Europe is acting as a rule setter and I expect other countries to pass similar legislation, creating a wave of compliance markets around the world.

🤩 In practice, what we are seeing is carbon markets merging: high quality carbon projects finding their way into a major compliance use case!

🎙️ There is a LOT to unpack. Thankfully for you, Eve Tamme and I sat down with the CBAM MVP Dan Maleski from Redshaw Advisors to go deep into the weeds on this.

🖇️ Check out our latest CDR Policy Scoop here: https://lnkd.in/et-TXAhg

📜 And here the link to the draft implementing act for the policy nerds out there. Open for consultation until June 10th: https://lnkd.in/epqq3PjG

⁉️ What is your take? Do you share my excitement on this one?

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