CBAM Guidance and EU ETS Reform to 2040: What Businesses Need to Know — Q3 2026
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Q3 2026 was the busiest compliance quarter of the year so far. The European Commission closed out its implementation guidance for CBAM's definitive period across two release windows, and separately proposed extending the EU Emissions Trading System through 2040 with broader sector coverage and new international-credit provisions. Away from Brussels, sustainable aviation fuel mandates took shape in Brazil and gained funding in the Netherlands, China tightened its carbon market's legal foundations while opening new market-instrument demand through its Zero-Carbon Factory program, and fresh bilateral carbon-credit agreements extended Singapore's Article 6 network alongside a new linkage between the Washington, California, and Quebec carbon markets. Here's what happened across the quarter and what it means for your business.
Published on 1st October, 2026
EU completes CBAM guidance for the scheme's definitive period
What happened
The European Commission finalized its implementation guidance for the Carbon Border Adjustment Mechanism's definitive period . In August, it published ten guidance documents: four general guides covering the CBAM compliance cycle, emissions monitoring and reporting, calculation of embedded emissions, and the adjustment of CBAM certificate obligations against EU ETS free allocation, plus six sector-specific guides with worked examples for cement, hydrogen, fertilizers, iron and steel, aluminum, and electricity. The Commission subsequently it followed with dedicated guidance on verification and accreditation for CBAM verifiers and National Accreditation Bodies, published alongside a CBAM Registry access procedure. Verifiers can register and gain system access from September 1, 2026, and accredited verifiers must register in the Registry within two months of accreditation.
What it means for your business
Importers of cement, hydrogen, fertilizers, iron and steel, aluminum, and electricity into the EU now have worked, sector-specific examples for calculating embedded emissions and adjusting CBAM certificate obligations against free allocation, plus a clear path to independently verified emissions data once accredited verifiers are in place. Non-EU producers and EU importers of these goods can confirm their emissions data is being independently verified in time for the 2027 declaration cycle, since verified figures determine the number of certificates an importer must purchase.
Entry into force
The guidance applies now. The definitive CBAM regime, including certificate purchase obligations based on verified emissions, begins January 1, 2027.
Further reading
European Commission CBAM implementation guidance documentation · European Commission publishes guidance for CBAM verifiers and accreditation bodies
EU proposes ETS extension and broader instrument recognition through 2040
What happened
On July 17, the European Commission proposed a package of changes to the EU Emissions Trading System running from 2030 through 2040. The proposal softens the cap, linear reduction factor, and free allocation reduction pathway, and adjusts Market Stability Reserve parameters, while making free allocation conditional on company investment in decarbonization. Coverage broadens to include new outbound flights from EEA airlines, small marine vessels, and waste incinerators. The same proposal would make CORSIA mandatory for aviation from 2027 through 2035, with transition rules to avoid double obligations between the EU ETS and CORSIA; introduce international carbon credits into the EU ETS from 2036 via EU-centralized procurement; add funding support for sustainable aviation fuel and sustainable maritime fuel, including e-fuels and EU-produced fuels; and permit the use of carbon removals, including BECCS and DACCS certified under the Carbon Removal and Carbon Farming Regulation and located in Europe, from 2031, also via EU-centralized procurement. A final agreement is expected in Q1 2027.
What it means for your business
The proposed EU ETS revision would broaden regulatory coverage across aviation, maritime, waste, and industry, while increasing support for sustainable fuels and industrial decarbonization. For companies in affected sectors, the main implications are likely to include more complex compliance requirements, closer links between investment and carbon costs, and new considerations around fuel eligibility, traceability, and interaction with international schemes. As the proposal remains subject to negotiation, businesses can track potential operational and financial impacts as the final rules take shape.
Entry into force
Proposed changes apply from 2030 for the cap and allocation pathway, 2027 for the CORSIA mandate, 2031 for carbon removals, and 2036 for international credits. Final agreement expected Q1 2027.
Further reading
EU agrees measures to limit ETS2 carbon price swings before 2028 launch
What happened
The Council of the EU and the European Parliament reached a provisional agreement on June 11, 2026, to amend the Market Stability Reserve for ETS2, the EU's emissions trading system covering buildings, road transport, and additional sectors, due to launch in 2028. The agreement extends the reserve's price-stabilizing role beyond 2030, doubles the volume from 20 million to 40 million of allowances released when prices exceed EUR 45 per tonne of CO2 equivalent, and introduces a more gradual release mechanism when circulating allowances fall below 260 million. Both institutions must still formally endorse the text before it enters into force.
What it means for your business
Fuel and heating suppliers that will hold compliance obligations under ETS2 gain a clearer view of how the scheme is designed to respond to price shocks once trading starts. Companies preparing for ETS2 compliance may want to factor the revised intervention thresholds into their allowance budgeting and hedging plans ahead of the 2028 launch.
Entry into force
Formal adoption by the Council and Parliament, plus legal-linguistic revision, is still pending. Once complete, the revised reserve will apply ahead of ETS2's operational launch in 2028.
Further reading
ETS2 market stability reserve: Council and Parliament reach provisional agreement, Council of the EU
European Commission adopts revised, lower-burden sustainability reporting standards
What happened
The European Commission adopted revised European Sustainability Reporting Standards (ESRS), including a new voluntary reporting standard for smaller companies. The revision is designed to reduce administrative burden for EU businesses while maintaining high-quality disclosures. Both delegated acts, the ESRS revision and the voluntary reporting standard, will be transmitted to the European Parliament and the Council of the EU.
What it means for your business
This confirms the direction already signaled by the Omnibus bill: reporting burdens and thresholds are being reduced for EU businesses. Existing voluntary CSR frameworks, now more closely aligned with ESRS, are likely to remain dominant, and companies building out Scope 3 reporting programs can align them to the revised, lower-burden standard rather than the version they may have started scoping against.
Entry into force
Subject to a two-month scrutiny period, extendable by a further two months; expected to pass and apply from 2027.
Further reading
European Commission: Corporate Sustainability Reporting Directive
Spain transposes RED III: new Royal Decree establishes biomethane incentives
What happened
On July 21, Spain's Ministry for the Ecological Transition and the Demographic Challenge (MITECO) approved a Royal Decree transposing the EU's Renewable Energy Directive III. The regulation establishes, for the first time, a comprehensive and stable framework for renewable transport fuels through 2040, including incentives for biomethane.
What it means for your business
The Royal Decree gives biomethane producers in Spain a stable, bankable revenue mechanism through 2040, replacing the previous ad hoc support landscape. Biotickets tied to Spanish biomethane can be sourced to help meet Spanish and broader EU renewable transport obligations.
Entry into force
Spain. Royal Decree approved July 21, 2026; framework runs through 2040.
Further reading
Netherlands: €290 million in state aid funds domestic e-SAF production
What happened
The European Commission approved two Dutch State aid schemes with a combined budget of €290 million to support the development and production of sustainable aviation fuel (SAF) in the Netherlands. The schemes target e-SAF and non-HEFA advanced bio-SAF specifically, with support delivered across five funding rounds running from 2027 to 2037. The Dutch government estimates the supported projects could produce up to 285 kilotonnes of SAF a year.
What it means for your business
Renewable hydrogen and power-to-liquid producers now have funding in place to help scale e-SAF production in the Netherlands. Biomethane suppliers whose feedstocks or offtake connect to eligible advanced bio-SAF pathways may gain a structural demand signal, though a mandate to use SAF creates demand without necessarily guaranteeing a price that makes a particular plant or production technology profitable. The scale of that demand depends on which projects and chain-of-custody models each funding round supports. Airlines, fuel blenders, and biomethane and hydrogen producers active in the Dutch aviation fuel supply chain can factor the 2027 funding-round timeline into procurement and partnership planning.
Entry into force
Funding is delivered across five rounds between 2027 and 2037. The State aid approval itself is confirmed.
Further reading
China's Zero-Carbon Factory program signals rising demand for GECs, biomethane, and carbon credits
What happened
On July 22, China's Ministry of Industry and Information Technology (MIIT) launched a national program to develop Zero-Carbon factories and data center facilities. Eligible applicants must meet baseline requirements, including a renewable energy consumption ratio and an emission intensity threshold, and demonstrate a pathway to near-zero operational CO2 emissions through technology upgrades, energy restructuring, and market instruments, with targets due no later than 2030. MIIT will confirm the final list of qualifying factories and facilities, with progress assessed annually.
What it means for your business
The program signals rising domestic support for Guarantees of Origin-style Green Electricity Certificates, biomethane, carbon credits, and carbon management services as 2030 approaches. Verified Zero-Carbon factories must meet renewable power consumption of at least 95%, covering electricity, heat and cooling, and primary energy such as gas and fuel. This strict threshold may affect demand for GECs, biomethane certificates, and green fuels. Carbon offsets are recognized against emission compensation, including ITMOs and China's national voluntary credits (CCERs), creating a possible carbon credit opportunity. Affected sectors include data centers and manufacturing, including automotive, battery, solar PV, electronics, and mechanical industries.
Entry into force
Targets due no later than 2030; MIIT to confirm qualifying facilities, with annual progress assessment.
Further reading
Singapore's draft Digital Infrastructure Bill ties data center licensing to carbon credit surrender
What happened
On July 1, Singapore's Ministry of Digital Development and Information (MDDI) released the draft Digital Infrastructure Bill, which covers environmental sustainability requirements for data centers and seeks to impose and raise baseline environmental sustainability standards across the sector.
What it means for your business
The draft bill proposes that data centers seeking a license must meet specified mitigation requirements, including the surrender of eligible international carbon credits. If enacted, this creates a new, licensing-linked requirement for carbon credits among Singapore-based data center operators.
Entry into force
Draft bill under public consultation; entry into force pending finalization.
Further reading: MDDI Public Consultation on the Digital Infrastructure Bill
China's Ecological and Environmental Code takes effect, strengthening carbon market enforcement
What happened
China's Ecological and Environmental Code (EEC) took effect on August 15, 2026. It is the country's first comprehensive codification of environmental law and its second formal statutory code after the Civil Code, consolidating 1,242 articles covering pollution control, ecological protection, climate governance, and green and low-carbon development into a single, coordinated legal framework. The Code provides a stronger statutory foundation for China's carbon-peaking and carbon-neutrality goals, including the operation and enforcement of its national emissions trading system (ETS).
What it means for your business
Entities covered by China's national ETS now operate under a Code that increases the legal exposure for non-compliance: failing to surrender sufficient allowances can trigger an initial fine of RMB 1 to 5 million. Eligible China Certified Emission Reductions (CCERs) can offset up to 5% of a covered entity's verified emissions, keeping offset demand from ETS-obligated emitters structurally in place. Companies transacting compliance instruments in or with exposure to China's carbon market can review counterparty and contractual terms against the Code's strengthened enforcement provisions.
Entry into force
In force from August 15, 2026.
Further reading
Ministry of Ecology and Environment: Ecological and Environmental Code
Singapore and Laos sign Article 6 agreement for carbon credit trading
What happened
Singapore and Laos signed a bilateral Implementation Agreement under Article 6 of the Paris Agreement on September 4, 2026, establishing the legal framework for generating and transferring internationally corresponding-adjusted carbon credits between the two countries. It's Singapore's twelfth such agreement and its fourth with an ASEAN member state.
What it means for your business
The agreement creates a new sovereign-authorized supply route for internationally transferred mitigation outcomes originating in Laos, which companies can apply toward Singapore's carbon tax obligations under approved international credit categories. Businesses with carbon tax liabilities in Singapore, or with Southeast Asian supply chains generating emissions-reduction projects, can assess whether Laos-originated credits fit their compliance or voluntary procurement strategy.
Entry into force
The agreement is in force from the signing date of September 4, 2026. Detailed project eligibility and crediting procedures will follow as both governments implement the agreement.
Further reading
Brazil sets sustainable aviation fuel mandate schedule for domestic airlines
What happened
Brazil's federal government issued Decree No. 13,094 on August 12, 2026, establishing the operational framework for the ProBioQAV sustainable aviation fuel program. The decree sets a CO2 reduction mandate starting at 1% from January 2027 and rising to 10% by January 2037, applying to aviation operators emitting 10,000 tonnes of CO2 or more annually. Compliance is met through a book and claim system: operators retire Sustainability Certificates for Sustainable Aviation Fuel (CS-SAF), with carbon credits and other alternative instruments available as a partial offset, capped at 15% of the annual target through 2028 and stepping down to 5% from 2030 onward.
What it means for your business
Airlines and fuel suppliers operating in Brazil now have a fixed compliance timeline to plan procurement against, alongside the other aviation carbon compliance obligations, such as CORSIA and EU ETS, that many of the same operators already manage. The book and claim model lets operators source certified sustainable aviation fuel or eligible offset instruments from outside their direct supply chain, widening the pool of counterparties available to meet the mandate. Companies with Brazilian aviation exposure can map their CS-SAF and offset procurement needs against the January 2027 start date and the declining offset caps that follow through 2030.
Entry into force
The mandate takes effect on January 1, 2027, in Brazil. Complementary monitoring, reporting, and verification rules remain under public consultation, with ANAC's consultation period open through October 1, 2026.
Further reading
Government of Brazil: Decree No. 13,094/2026 · Sustainable Aviation Fuel (SAF): ANAC launches public consultation following the issuance of the regulatory decree, Mayer Brown
Washington finalizes rule linking its carbon market with California and Quebec
What happened
Washington State's Department of Ecology published final rule language enabling its Cap-and-Invest program to link with the California-Quebec joint carbon market, effective October 24, 2026. Washington's implementation plan, describing how the state will operate under linkage, was due for publication later in September 2026. California and Quebec still need to complete their own rulemakings and approvals before the three-way market can formally launch, which could happen as early as 2027.
What it means for your business
Once linked, the three jurisdictions will hold joint allowance auctions and trade under a shared price. Companies with compliance obligations under Washington's Cap-and-Invest program, or that already trade in the California-Quebec market, can review how a combined allowance pool and joint auction calendar affects their compliance planning across all three jurisdictions.
Entry into force
Washington's linkage rule takes effect October 24, 2026. California and Quebec's own approvals are still pending, so the joint market is not yet operational; a formal three-way launch could occur as early as 2027.
Further reading
Washington publishes final rule language to enable California-Quebec carbon market linkage, Carbon Pulse · Cap-and-Invest linkage, Washington State Department of Ecology
GHG Protocol Land Sector and Removals Guidance: new standard signals shift toward waste-based feedstocks
What happened
The GHG Protocol published carbon accounting guidance for its Land Sector and Removals Standard (LSRS), detailing requirements for companies to report emissions arising from land-sector activities, including crop-based biofuel production. The standard is voluntary today and may eventually be incorporated into corporate disclosure regulations in jurisdictions including California and the EU that require covered companies to conform to the GHG Protocol.
What it means for your business
LSRS is expected to increase emissions disclosure burdens for crop-based biofuels, which may affect voluntary corporate demand for waste-based feedstocks, affecting biomethane, sustainable aviation fuel, and TERCs. Waste oils, including used cooking oil and tallow, carry no land-use-change risk.
Entry into force
Voluntary today; potential incorporation into corporate disclosure regulation in jurisdictions including California and the EU from 2027.
Further reading
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