CBAM factor and free allocation phase-in: current law and proposal

The terminology problem

CBAM articles often mix three related ideas: the legal CBAM factor, EU ETS free allocation, and the share of embedded emissions that is effectively covered by CBAM certificates. Mixing those terms creates bad planning files because one person may read 'factor' as the free-allocation adjustment and another as the charged share.

CBAM Pulse keeps the distinction explicit. The legal CBAM factor/free-allocation adjustment starts high and declines under the adopted schedule. The derived CBAM-covered share is the complement: the part of embedded emissions that the cost estimate applies certificates to for a given year.

Current adopted schedule: free allocation phases out by 2034

Under the adopted EU ETS/CBAM framework, the legally defined free-allocation adjustment is 97.5% for 2026 and declines to 0% by 2034. Its complement — the derived CBAM-covered share — starts at 2.5% in 2026 and rises to 100% by 2034 (Directive (EU) 2023/959; Regulation (EU) 2023/956).

That means the same imported tonne can have a larger CBAM certificate exposure in later years even if the emissions intensity and certificate price were unchanged. This is why a 2026 cost view and a 2030 or 2034 cost view can differ materially without changing the goods row.

• 2026: 97.5% free-allocation adjustment retained; 2.5% derived CBAM-covered share.
• 2030: 51.5% free-allocation adjustment retained; 48.5% derived CBAM-covered share.
• 2034: 0% free-allocation adjustment retained; 100% derived CBAM-covered share.

How this affects a cost planning row

A planning estimate usually combines tonnes imported, embedded emissions intensity, the derived CBAM-covered share for the year, and the certificate price. Certificate prices are published by the European Commission, while the phase-in schedule comes from the adopted legal framework.

The important operating habit is to keep the factors separated in the import file. One column can hold emissions intensity, one column can hold the import year, one can show the adopted free-allocation adjustment, one can derive the covered share, and one can cite the certificate price source date.

Why certificate price queries belong in the same cluster

Search Console already shows CBAM certificate price, CBAM certificates, CBAM price, and CBAM Q2 price queries. Those searches are not only about the price page. They are often part of a larger question: what share of emissions is priced in a given year, and how should that be explained in a preparation file?

That is why the factor/free-allocation guide links the certificate price guide, certificate price tracker, and cost calculator. The price alone is only one input; the phase-in schedule controls how much of the embedded emissions the price is applied to in a planning estimate.

What COM(2026) 616 proposesProposal — not law

COM(2026) 616 is a European Commission legislative proposal published as part of the EU ETS review package. The Commission says it proposes slowing the phase-out of free ETS allocation for sectors covered by CBAM, including the reintroduction of 15% of the free allocation phased out due to the CBAM factor starting in 2028.

The proposal would reduce and delay the phase-out of free allocation for existing CBAM sectors and complete that phase-out later than the current adopted schedule. It is a proposal, not adopted law. Current adopted rules remain unchanged unless the legislative process produces a final act that is adopted, published, and reviewed for implementation.

This reflects a legislative proposal (e.g. COM(2025)989) that has not been adopted. Scope, product lists, and dates may change or may not enter into force.

How to keep current law and proposal scenarios separate

The clean way to handle the proposal is not to overwrite current assumptions. Keep one current-law planning view that uses the adopted schedule and, if useful, a separate scenario note that describes the proposal's direction and status. The scenario should be labelled proposal-stage and dated to the official source.

This avoids the most common mistake: using a proposal to lower a current-year planning number, then forgetting that the product, adviser, or finance team is looking at a non-final scenario. Proposal material can help decide what to monitor. It should not replace adopted values in deterministic tools.

What importers can do now

For current preparation, use adopted rules for live calculations and import-file assumptions. Track COM(2026) 616 as an update to monitor, especially if future-year exposure matters to purchasing, budgeting, or supplier discussions. Keep the proposal in the watchlist, not inside the current-rule value columns.

If the proposal moves through the legislative process, revisit affected guides, assumptions, and calculators after the final text is available. Until then, the practical work remains the same: identify covered goods, collect supplier data, preserve evidence, and keep source dates visible.

Common mistakes to avoid

The first mistake is calling the derived covered share the CBAM factor without saying what is being derived. The second is treating a certificate price as the whole cost formula. The third is putting proposal-stage values into the same column as adopted values.

A fourth mistake is ignoring supplier data because the phase-in percentage is low in 2026. Low covered share does not remove the need to understand the goods, source data, default/actual basis, and evidence gaps that will matter more as the phase-in progresses.

How CBAM Pulse handles it

CBAM Pulse separates source-linked current assumptions from proposal-stage updates. The public cost calculator uses the adopted schedule and derives the covered share from the legal free-allocation adjustment; the updates feed labels COM(2026) 616 as a legislative proposal.

This lets users plan with the current official rule set while still monitoring a material proposal. It also prevents a social post, press headline, or draft scenario from silently changing a deterministic calculation path.