Air pollution – Photo Pexels
(STRASBOURG) – The EU Council and European Parliament reached a provisional agreement Tuesday to set up an EU Carbon Border Adjustment Mechanism to combat climate change and prevent carbon leakage.
The Carbon Border Adjustment Mechanism (CBAM) now needs to be confirmed by ambassadors of the EU member states, and by the European Parliament, and adopted by both institutions before it is final.
Czech industry minister Jozef Síkela said he was pleased to have reached agreement: “This mechanism promotes the import of goods by non-EU businesses into the EU which fulfil the high climate standards applicable in the 27 EU member states. This will ensure a balanced treatment of such imports and is designed to encourage our partners in the world to join the EU’s climate efforts.”
CBAM targets imports of products in carbon-intensive industries. The objective of CBAM is to prevent EU greenhouse gas emissions reduction efforts being offset by increasing emissions outside its borders through relocation of production to non-EU countries (where policies applied to fight climate change are less ambitious than those of the EU) or increased imports of carbon-intensive products.
CBAM will initially cover a number of specific products in some of the most carbon-intensive sectors: iron and steel, cement, fertilisers, aluminium, electricity and hydrogen, as well as some precursors and a limited number of downstream products. Indirect emissions would also be included in the regulation in a well-circumscribed manner.
CBAM will begin to operate from October 2023 onwards, initially with reporting obligations only, the aim being to collect data. From then on, the full CBAM will be phased in gradually, in parallel with a phasing out of free allowances, once it begins under the revised EU emissions trading system (ETS) for the sectors concerned. This will ensure compatibility of CBAM with international rules on trade.
The phasing out of free allowances for CBAM sectors still needs to be agreed in the context of ongoing EU ETS negotiations. Further work is also required on measures to prevent carbon leakage on exports.
Ensuring full compatibility of CBAM with international obligations of the EU, including in the area of international trade, remains of fundamental importance.
The financing of administrative expenses of the European Commission, which will take on many centralised CBAM-related administrative tasks, will need to be decided in accordance with the annual EU budget procedure.
