When the European Green Deal was formally adopted in July 2020, it marked not just another high-level policy framework, but what many saw as a decisive shift in the EU’s climate and industrial strategies. In the months that followed, as the Green Deal Work Programme took shape, attention turned rapidly to implementation mechanisms—where lofty ambitions would meet the realities of supply chains, manufacturing, and, inevitably, taxation. Among these, supply-chain carbon taxation emerged as a particularly complex, yet unavoidable, challenge. By the autumn of 2020, European Commission–funded pilot projects had begun grappling with the task of integrating carbon taxes into operational and financial models, drawing heavily on the European Emissions Trading System (ETS) open pricing data.
At the heart of these pilots was a relatively simple, if politically sensitive, idea. If carbon has a price—and under the ETS it certainly does—then that price should, logically, be reflected not just in energy bills or direct emissions payments, but all the way down the supply chain to the final product. The difficulty, of course, lay in execution. Few large firms, even those well-versed in carbon reporting, had systems in place to accurately assign carbon costs to individual products or components. And fewer still had a clear strategy for passing those costs through without triggering commercial backlash or competitive disadvantage.
For European Commission–funded pilots, the starting point was data. ETS open pricing data, published regularly and freely accessible, provided a baseline carbon price. But pilots needed more than just the headline price per tonne of CO2 equivalent. They needed granular data—allowing for adjustments by sector, geography, and, where possible, temporal fluctuations. Some projects chose to smooth this data, averaging over time to provide stability. Others embraced the volatility, seeing it as a useful market signal. There was, and remains, no universally agreed method. That ambiguity, though frustrating for some, perhaps reflects the reality of trying to internalize externalities in a market economy.
Energy-intensive firms—steelmakers, cement producers, chemical manufacturers—faced particular pressures. The Green Deal’s ambition was not merely for these firms to account for their carbon; they were to become conduits for carbon pricing, embedding these costs into products in ways that would, in theory, influence downstream behavior. Guidance began to circulate, both formal and informal, on how to approach this. Many large firms were encouraged to start by calculating product-level carbon footprints—not an entirely new exercise, but one now tied directly to tax and price signals. This meant expanding life-cycle assessments to include carbon tax pass-through as a specific metric.
The process was, predictably, uneven. Some firms embraced the opportunity, seeing in it a chance to differentiate low-carbon products in increasingly climate-conscious markets. Others, particularly those operating in highly competitive or commoditized sectors, were more cautious. The fear, not unfounded, was that openly passing through carbon costs would simply drive customers to less scrupulous competitors, particularly from outside the EU where comparable carbon pricing might not yet apply. This tension—between transparency and competitiveness—remains unresolved and may well define the next phase of Green Deal implementation.
Still, for those companies willing to engage, practical tools began to emerge. One such tool was the development of “carbon pass-through” declarations—public statements that outlined, in clear terms, how carbon costs were calculated, allocated, and embedded in product pricing. Crafting these declarations required care. The templates that gained traction typically included a brief description of the firm’s approach to carbon accounting, the specific ETS data sources referenced, and the methodology for assigning costs to products or product lines. Some firms also included scenario analyses, showing how changes in carbon prices would (or wouldn’t) affect end prices.
Interestingly, while these declarations were ostensibly about transparency, they also served a defensive function. By publishing detailed methodologies, firms sought to preempt accusations of greenwashing or, conversely, of using carbon pricing as a cover for unjustified price hikes. In a few cases, declarations became marketing tools—highlighting the firm’s proactive stance on climate issues. In others, they were more subdued, posted quietly on corporate websites or buried in annual reports. There was, in short, no single model. The diversity of approaches perhaps mirrors the complexity of the issue itself.
It’s worth noting, too, that the pilots revealed gaps—both in data and in organizational capacity. Many firms found that their internal systems weren’t yet capable of linking procurement, production, and emissions data in the granular ways required. Others struggled with the communications side: how to explain carbon cost pass-through in ways that customers, regulators, and the public could understand and accept. And always, there was the looming question of alignment with future regulatory changes. The Green Deal, ambitious as it is, remains a work in progress, and firms know that today’s templates may need to be redrawn tomorrow.
What emerged from these early efforts was less a polished solution and more a starting point—a set of practices, tools, and ideas that will, over time, shape how carbon pricing filters through European supply chains. Whether these practices will achieve the intended environmental and economic outcomes remains to be seen. But the pilots have at least begun the difficult task of making carbon costs visible—not just to firms, but to the societies they serve.