The European Union needs investment guarantees, long-term purchasing agreements and international partnerships alongside the Carbon Border Adjustment Mechanism (CBAM) if carbon pricing is to translate into new clean industrial capacity, according to a study by EPICO and the Konrad-Adenauer-Stiftung.
The organisations said Europe represents about one-quarter of the global pipeline of clean industrial projects, but more than 90% of European projects have not yet reached a final investment decision.
Financing risks remain a barrier to industrial projects
The report calls for maintaining a credible carbon price while addressing the financing and commercial risks that can prevent industrial projects from moving forward.
Its analysis proposes measures including investment guarantees, risk-sharing mechanisms, co-investment and long-term offtake agreements. Such arrangements would provide greater certainty over future revenues and help address the risks associated with capital-intensive industrial investments.
The study argues that border protection on its own does not make high-cost industrial projects bankable.
CBAM resources and international cooperation
The organisations also recommend directing a meaningful share of CBAM-related resources towards decarbonisation projects in partner countries.
The proposed approach includes cooperation on emissions monitoring and recognition of differences in administrative capacity. The report identifies these elements as particularly relevant for more vulnerable economies.
The recommendations represent a policy agenda rather than an announcement of a new EU funding allocation. Implementing them would require decisions concerning how support is financed, targeted and linked to measurable industrial outcomes.
Carbon pricing paired with commercial risk-sharing
The report, covered by Carbon Herald on 24 September, shifts attention from the existence of a carbon border charge to the conditions required for investment in cleaner industrial capacity.
Under the approach outlined by EPICO and the Konrad-Adenauer-Stiftung, carbon pricing provides the investment incentive, while long-term contracts and risk-sharing mechanisms can influence whether cleaner industrial projects are able to attract capital.
