The central message from the review is that the EU ETS and CBAM should no longer be considered separate policies. They are increasingly becoming two sides of the same European industrial strategy.

by Marta Diez

In the short term, the effect on the EUA market appears relatively limited — many measures were already anticipated and largely priced in. The greater significance lies beyond 2030: how the European cement industry finances decarbonisation while remaining internationally competitive.

The EU ETS is intended to accelerate industrial decarbonisation within Europe, while CBAM is designed to protect that transition from carbon leakage and unequal carbon costs on imports. The review treats the two as a single framework rather than parallel instruments.

The information that follows sets out five implications for cement producers and carbon—cost managers, and the strategic questions every company should now be asking.

0l. Free allocation may be extended — but increasingly conditional

One of the most relevant proposals for the cement sector is the possible extension of free allocation for CBAM—coveredsectors from 2034 to 2038. This would give European producers additional time to invest in low—carbon technologies whileCBAM becomes fully operational, reducing some of the transition risk for energy—intensive industries.

However, this should not be interpreted as unconditional protection. Future free allocation is expected to become increasingly dependent on credible decarbonisation plans, actual implementation and demonstrated investment. The policy direction is therefore shifting from protecting industry solely because it is exposed to international competition,towards supporting companies that actively reduce emissions.

For cement producers, this means thot carbon strategy, capital allocation and industrial investment planning ore becoming inseparable.

02. Greater emphasis on financing industrial decarbonisation

The proposal recognises that carbon pricing alone will not be sufficient to finance the transformation of heavy industry. Theplanned Investment Booster, expected from 2027 and supported by approximately 400 million EUAs, could later evolve intoa European Industrial Decarbonisation Bank — reducing investment risk through mechanisms such as Carbon Contracts forDifference and other forms of long—term revenue support.

For the cement industry, this could improve the business case for investments including:

• Carbon Capture and Storage;
• alternative fuels and clinker substitution;
• electrification and hydrogen;
• energy—efficiency improvements; and
• next—generation kiln

The companies with the most mature projects and credible pathways are best positioned to access this support. Carbonmarkets ore evolving from a compliance cost towards a potential source of investment capital for industrial transformation.

03. Extending free allocation does not weaken CBAM

The extension of free allocation should not be seen as a retreat from CBAM. It remains a central element of Europe’s carbon—leakage and competitiveness framework; the proposed extension would instead provideEuropean manufacturers with a more manageable transition period while investment support and low—carbon infrastructure ore developed.

For non—European cement and clinker producers exporting into the EU, the core direction remains unchanged. Exporters will still need to:

• calculate embedded emissions accurately;
• establish reliable monitoring and verification systems;
• understand the relationship between CBAM certificate prices and the EU ETS;
• incorporate carbon costs into commercial and pricing strategies; and
• prepare for the future purchase and surrender of CBAM

The message for international exporters is therefore clear: CBAM is not slowing down. Carbon accounting,verification and carbon—cost management are becoming part of the normal conditions for accessing theEuropean market.

04. Immediate EUA price impact may be limited — but manage long-term exposure

The initial EUA market reaction was relatively modest, as mony elements of the proposal had already beenanticipated. Over the medium term, some measures could be interpreted as moderately beorish for EUA prices, including a slower reduction in the emissions cop, a more gradual phase—out of free allocation, thepossible integration of carbon removals, and the potential future use of international credits.

However, these remain proposals, subject to negotiations between the European Commission, Parliament andCouncil. Companies should avoid making long—term investment or procurement decisions on theassumption thot the current proposal will be adopted without amendment. The central issue is not simply theEUA price today, but the evolution of net carbon exposure as free allocation declines and decarbonisationobligations increase — so carbon procurement should be treated as a long-term risk-management exerciserather than a once—a—year compliance purchase.

05. What should cement companies be doing now’?

European cement producers

The immediate priority is to prepare for the next investment cycle by:

• developing credible plant—level decarbonisation roadmaps;
• assessing how future free allocation may depend on project implementation;
• identifying which investments could qualify for European support;
• integrating carbon, energy and capital—expenditure strategies;
• developing structured EUA procurement and hedging policies; and
• preparing projects early enough to compete for future

Non-European producers exporting into the EU

Priorities should include:

• improving the quality and traceability of emissions data;
• strengthening third—party verification processes;
• assessing future CBAM liabilities by product and destination;
• incorporating carbon costs into soles contracts and pricing decisions;
• evaluating opportunities to reduce product carbon intensity; and
• considering CBAM exposure as port of long—term European market

Four strategic questions

The review raises four strategic questions for every cement company.

01. How does this affect my plant*

The immediate operational impact may be limited, but future investment planning and access to free allocation will increasingly depend on credible decarbonisation action.

02. How do I finance CCS or kiln upgrades?

The Investment Booster and future Industrial Decarbonisation Bank could reduce project risk — but companieswill need mature and investable projects.

03. What happens to my carbon costs*

Short—term market changes may be limited, but long—term exposure will require active procurement, hedging andrisk management.

04. How do I remain competitive against imports?

Competitiveness will increasingly depend on combining low—carbon production, access to funding, efficient carbonprocurement and full CBAM readiness.

The EU ETS is evolving beyond a carbon—pricing mechanism — it is increasingly becoming on industrial investment and competitiveness policy. The companies most likely to succeed over the next decode will notsimply be those thot purchase EUAs at the lowest possible price; they will be those thot use carbon marketsstrategically to finance decarbonisation, manage risk and remain competitive under CBAM.

Join CarbonZero Global Conference and Exhibition (Brussels/ Belgium, October: 27- site visit Holcim Obourg Plant, 28-29 – Conference & Exhibition ) and meet Marta as she will be speaking and having a monumental panel on CBAM and EU ETS! register now as places are limited and previous editions were sold out – email us at contact@industrylink.eu or go to https://industrylink.eu/event/carbonzero-global-conference-exhibition-2026/ and register.