The European Council has reached an agreement for general approach on the Carbon Border Adjustment Mechanism regulation, which is one of the key elements of the European Union’s Fit for 55 packages, with the main objective is to avoid carbon leakage & encouraging partner countries to establish carbon pricing policies to fight climate change. The products of cement, aluminium, fertilizers, electric energy production, iron & steel sectors will be covered by Carbon Border Adjustment Mechanism. Compared to the initial proposal by the Commission, the Council opted for a greater centralization of the Carbon Border Adjustment Mechanism governance, where it makes sense and contributes to greater efficiency. For example, the new registry of Carbon Border Adjustment Mechanism importers is to be centralized at EU level.The Council also foresees a minimum threshold which exempts from the Carbon Border Adjustment Mechanism obligations consignments with a value of less than EUR 150. This measure would reduce administrative complexity, as around one third of consignments to the Union would fall under that category, and their aggregate value and quantity represents a negligible part of greenhouse gas emissions of total imports of such products into the Union.The Council still has to make sufficient progress on a number of issues which are closely related to Carbon Border Adjustment Mechanism, but are not part of the draft legal text of the CBAM regulation. This concerns in particular the phase-out of the free allowances allocated to industry sectors covered by the Carbon Border Adjustment Mechanism, established by the EU ETS directive, and appropriate solutions on the issue of limiting potential carbon leakage from exports, so that economic efficiency, environmental integrity and WTO compatibility of the Carbon Border Adjustment Mechanism are ensured.Two other issues will continue to be followed1. The proposals by the Commission for own resources, based, inter alia, on revenues from the sale of Carbon Border Adjustment Mechanism certificates, which are under consideration for deliberation by 1 July 2022, in accordance with the inter-institutional agreement of 16 December 20202. The Council noted the importance of greater international cooperation with third countries, including through the establishment, in parallel to the Carbon Border Adjustment Mechanism, of a climate club where carbon pricing policies can be discussed and encouraged. Once sufficient progress will have been achieved at the Council, the Council will start negotiations with the European Parliament, after the latter has agreed its position.The Commission presented its proposal for a regulation establishing a Carbon Border Adjustment Mechanism on 14 July 2021. Carbon Border Adjustment Mechanism targets imports of carbon-intensive products, in full compliance with international trade rules, to prevent offsetting the EU’s greenhouse gas emissions reduction efforts through imports of products manufactured in non-EU countries, where climate change policies are less ambitious than in the European Union. It will also help prevent the relocation of the production or the import of carbon-intensive products.
The European Council has reached an agreement for general approach on the Carbon Border Adjustment Mechanism regulation, which is one of the key elements of the European Union’s Fit for 55 packages, with the main objective is to avoid carbon leakage & encouraging partner countries to establish carbon pricing policies to fight climate change. The products of cement, aluminium, fertilizers, electric energy production, iron & steel sectors will be covered by Carbon Border Adjustment Mechanism. Compared to the initial proposal by the Commission, the Council opted for a greater centralization of the Carbon Border Adjustment Mechanism governance, where it makes sense and contributes to greater efficiency. For example, the new registry of Carbon Border Adjustment Mechanism importers is to be centralized at EU level.The Council also foresees a minimum threshold which exempts from the Carbon Border Adjustment Mechanism obligations consignments with a value of less than EUR 150. This measure would reduce administrative complexity, as around one third of consignments to the Union would fall under that category, and their aggregate value and quantity represents a negligible part of greenhouse gas emissions of total imports of such products into the Union.The Council still has to make sufficient progress on a number of issues which are closely related to Carbon Border Adjustment Mechanism, but are not part of the draft legal text of the CBAM regulation. This concerns in particular the phase-out of the free allowances allocated to industry sectors covered by the Carbon Border Adjustment Mechanism, established by the EU ETS directive, and appropriate solutions on the issue of limiting potential carbon leakage from exports, so that economic efficiency, environmental integrity and WTO compatibility of the Carbon Border Adjustment Mechanism are ensured.Two other issues will continue to be followed1. The proposals by the Commission for own resources, based, inter alia, on revenues from the sale of Carbon Border Adjustment Mechanism certificates, which are under consideration for deliberation by 1 July 2022, in accordance with the inter-institutional agreement of 16 December 20202. The Council noted the importance of greater international cooperation with third countries, including through the establishment, in parallel to the Carbon Border Adjustment Mechanism, of a climate club where carbon pricing policies can be discussed and encouraged. Once sufficient progress will have been achieved at the Council, the Council will start negotiations with the European Parliament, after the latter has agreed its position.The Commission presented its proposal for a regulation establishing a Carbon Border Adjustment Mechanism on 14 July 2021. Carbon Border Adjustment Mechanism targets imports of carbon-intensive products, in full compliance with international trade rules, to prevent offsetting the EU’s greenhouse gas emissions reduction efforts through imports of products manufactured in non-EU countries, where climate change policies are less ambitious than in the European Union. It will also help prevent the relocation of the production or the import of carbon-intensive products.
