On the occasion of the publication of its 'climate law', the European Commission officially launched, on Wednesday 4 March, its work on a key policy instrument that will support its Green Deal in 2021.
"The EU is proud to be in the frontline of the fight against climate change. But we need to safeguard against companies shifting production to parts of the world where standards are more lax", said Paolo Gentiloni, European Commissioner for the Economy, on the same day.
In conjunction with the EU's ambition to become the world's first climate-neutral continent within thirty years, the mechanism will aim to prevent EU companies from being penalised against economic partners that are less climate-conscious, or to prevent a "carbon leakage" abroad by European operators who want to see their competitiveness preserved (see EUROPE 12388/6).
The Member States, led by France, therefore expect a great deal from this instrument. However, the idea has already been criticised on the other side of the Atlantic and, in order to be accepted by non-Member States, will have to be strictly aligned with WTO rules.
By publishing its inception impact assessment, calling on the parties to express their views on this tool, the Commission is outlining its thoughts on this.
Format. The initiative is "closely linked" to the price of carbon in the EU, regulated through the European Carbon Exchange, or 'EU ETS', and the Energy Taxation Directive, the Commission points out. In order to comply with its international commitments, the EU will need to implement measures that are complementary and commensurate to this internal carbon pricing.
The Commission gives some options here: a "carbon tax" on certain domestic and imported products, a new carbon duty or the extension of the EU ETS to imports into the EU.
Methodology: To assess the carbon content of imported products and thus their fair carbon pricing, the Commission suggests applying similar methodological considerations to those of the EU ETS by using reference values. An exception will be made for the exporter who has certified a lower carbon content or higher carbon cost at origin - the burden of proof is therefore on the exporter.
Other avenues will be examined, the Commission points out, such as defining the carbon content of products on the basis of their interaction with current and future climate policies, the text also states.
Sectors. The Commission considers that the selection of sectors subject to this measure should be based primarily on the risks of "carbon leakage" by economic operators. A study is underway to identify the risk of carbon leakage in the third and fourth trading phases of the EU ETS, the Commission adds.
Economic and social impacts, including the effect of the mechanism on value chains and consumer prices, will also be examined in an impact assessment to shed light on the Commission's decision.
Link to the consultation: https://bit.ly/2TnShPl (Original version in French by Hermine Donceel)