Germanwatch raises concerns about EU partners’ opposition to Carbon Border Adjustment Mechanism

In a report published on 17 June, the German think tank Germanwatch warns the EU of the consequences of its trading partners opposing the Carbon Border Adjustment Mechanism (CBAM). The authors of the report believe that the EU must adapt its strategy as soon as possible. 

The European Commission is due to present its proposal for a CBAM in mid-July. According to a draft of the text, it foresees that it will gradually enter into force from 1 January 2023 (see EUROPE 12733/9).

Ukraine, Turkey, Russia, Belarus and Bosnia and Herzegovina are among the countries that would be most affected by the CBAM, according to current forecasts.

Among the criticisms expressed by various countries, including China, the first and foremost criticism is the feeling that this is a protectionist measure on the part of the Union. Secondly, the EU is criticised for wanting to use CBAM resources for its own budget. This raises questions about compatibility with World Trade Organization (WTO) rules, especially if the EU maintains the free allocation of allowances to certain companies under the Emissions Trading Scheme (ETS).

“If the EU does not urgently address some of these concerns, there is a high risk that conflicts, especially with powerful trading partners such as China, could reduce the CBAM’s effectivity”, said the authors. 

They believe that the EU should consult more with its partners and engage in “proactive, clear and open communication”. They also believe that the EU should focus on the issues it has surrounding domestic carbon leakage, and not sell the mechanism as an international policy measure. 

Regarding revenues from the CBAM, Germanwatch believes that some of it should be redistributed outside of the EU, especially to low-income countries impacted by the mechanism. It also advocates exempting the least developed countries from the mechanism.

Finally, the allocation of free allowances should be removed to make the CBAM compatible with the WTO, according to the authors. 

See the report: https://bit.ly/2TWOdrW (Original version in French by Léa Marchal)