EU auditors question new fund backed by EU carbon border tax for polluting industries

The European Court of Auditors has questioned a proposed EU fund that would be financed partly by revenue from the bloc’s carbon border adjustment mechanism, or CBAM, raising doubts about whether the plan would drive meaningful new climate investment.

In an opinion published on Tuesday, the court said the Commission’s proposed Temporary Decarbonisation Fund may be flawed in design and impact and could do little to trigger additional green spending. The fund is intended to support EU producers of CBAM goods and help reduce the risk of carbon leakage, where companies move production to jurisdictions with weaker climate rules.

The European Commission proposed the fund on 17 December 2025 as part of changes to CBAM. Under the plan, 25% of CBAM certificate sales in 2026 and 2027 would be channelled into the fund, while the remaining 75% would count as an EU own resource.

The proposal is still moving through the EU institutions and has not become law. That leaves lawmakers and member states to decide whether the fund should proceed as drafted, be altered, or be dropped.

The auditors’ criticism comes at a politically sensitive moment for CBAM, which is meant to put a carbon price on selected imports and prevent emissions-heavy production from relocating outside the EU. The new fund is designed to return part of that revenue to industries facing the transition, but the court’s opinion suggests the mechanism may not add enough genuinely new investment to justify itself.

Further scrutiny is likely as the European Parliament and the Council review the proposal and assess how much revenue the fund could actually raise in the first years of operation.