German think tanks: CBAM alone will not decarbonise trade, recycle the revenue into climate partnerships

Two German think tanks argue that CBAM protects European carbon pricing but cannot decarbonise global trade on its own, and that part of its revenue should flow into decarbonisation projects in partner countries. The policy brief "From Climate Policy to Climate Partnerships: A European Strategy for Competitiveness, Investment and Global Decarbonisation", written by Simon Munkler and Dr. Bernd Weber and published in September 2026 by EPICO KlimaInnovation and the Konrad-Adenauer-Stiftung's Multinational Development Policy Dialogue, was picked up by trade press including Carbon Herald on September 24, 2026.

The brief lands one number that frames its whole argument: Europe hosts around a quarter of the global pipeline of clean industrial projects, yet more than 90 percent of those projects still await a final investment decision, according to an EPICO and Frontier Economics analysis cited in the report. Carbon pricing has created the pipeline; something else has to finance it.

What the report says CBAM can and cannot do

The report concludes that CBAM strengthens carbon leakage protection but cannot by itself mobilise investment, lower the cost of capital, transfer technology, or build durable international partnerships. The authors quantify what the mechanism does deliver: its introduction could enable the removal of up to 432 million free EU ETS allowances per year, worth around €35 billion, that would otherwise be allocated to European installations. On the revenue side, the report cites Sandbag estimates that CBAM in its current scope could collect €11.3 billion in fees annually under business-as-usual trade, falling to €7.0 billion if trading partners introduce their own carbon pricing.

That declining curve is, for the authors, the point. The burden shrinks when exporters decarbonise or their governments price carbon, so the mechanism already contains an economic incentive to cooperate. What it lacks is the cooperative offer to match. Internationally, the report says, the EU approach is widely perceived as unilateral, an imposition of decarbonisation costs on trading partners without support for their transition: "a stick without a carrot". EPICO CEO Bernd Weber put it more sharply in remarks reported by Carbon Herald, saying that seen from third countries the mechanism "acts above all as a new trade barrier" and that their perspective has been "neglected in the European debate".

The authors also warn against broadening CBAM to solve problems it was not designed for, which would add complexity and trade friction. The gap they want closed is the export gap: CBAM levels the playing field inside the EU market but gives European producers no equivalent protection in third-country markets.

The proposal: recycle CBAM revenue into decarbonisation abroad

The central recommendation is to link part of CBAM's revenue to decarbonisation investment in partner countries, converting a border cost into a visible benefit of cooperation. The report states it directly: "Recycling part of the economic value generated by CBAM into additional decarbonisation investment would not only improve fairness; it could turn the mechanism from a source of friction into an anchor for cooperation." The Commission's existing duty under Article 30(8) of the CBAM Regulation to report on effects on third countries is dismissed as insufficient to change perceptions unless action follows.

The recycling proposal comes with three conditions. Funding must be additional to existing development and climate finance commitments, allocated by decarbonisation impact per unit of public money rather than spending volume, and concentrated on a limited number of high-impact industrial partnerships instead of fragmented programmes. For least developed countries, the report goes further, proposing grandfathering of existing trade volumes and revenue-based alternatives that let partner countries retain equivalent carbon revenues domestically instead of outright exemptions.

The revenue idea sits inside a three-front strategy the report summarises as protect, partner, invest.

Why revenue use is now a live political question

The proposal arrives while EU institutions are negotiating competing claims on the same money, and CBAM certificate sales do not even start until February 1, 2027. Nine days before the report's press coverage, the European Parliament adopted its CBAM scope-expansion mandate 464-50 and, in a parallel 433-97 vote, backed the Temporary Decarbonisation Fund that would recycle CBAM-linked revenue into exposed EU producers. Parliament's mandate also replaced the Commission's safety valve with sector support funded from CBAM revenue. Every euro in those positions flows inward, to European industry; the think tanks propose sending part of it outward.

The institutional weight behind the paper makes the tension politically live. The Konrad-Adenauer-Stiftung is the foundation affiliated with the CDU, the party leading the German government, so an argument for external revenue recycling now circulates in the political family that shapes Berlin's position in the Council. The trilogue on the scope-expansion file, which Climate Commissioner Wopke Hoekstra wants concluded before the end of 2026, is where revenue allocation language will be settled first.

What the report means for exporters and importers

For non-EU exporters, the report puts a governing-party-adjacent German voice behind their side of the CBAM cost equation; for EU importers, it changes no current obligation. The paper's diagnosis echoes what affected countries have said for months, most bluntly when BRICS condemned CBAM as punitive and protectionist in August, and it lands the day before the WTO Dispute Settlement Body convenes on September 25, 2026 with CBAM litigation still pending. The difference is the source: this critique comes from Berlin and Brussels, not New Delhi.

Three practical takeaways follow for readers on either side of the border.

• Exporters gain a documented argument that decarbonisation and domestic carbon pricing shrink the CBAM bill, the report's own cited estimates falling from €11.3 billion to €7.0 billion annually
• Importers should watch the trilogue's revenue provisions, not this paper, for anything that changes the cost of compliance
• Suppliers asked for emissions data can expect the pressure to continue regardless of the revenue debate; the supplier data request generator covers what EU customers need

Whether the recycling idea survives contact with a budget negotiation in which EU producers already hold a 433-vote claim on the same revenue is a question for the trilogue era it was written for.