The European Centre for International Political Economy (ECIPE) published its position on the Carbon Border Adjustment Mechanism (CBAM) on Wednesday 3 November. The author of the report, ECIPE director Fredrik Erixon, believes that the current form of the CBAM “is not good enough”.
In his view, the instrument designed and published by the Commission in July (see EUROPE 12762/5) will not be sufficient to encourage third countries to implement a carbon pricing system. The sectors covered allow only a small proportion of European imports to be affected, he argues. Moreover, the cost of the CBAM to countries exporting to the EU would be low, as the products concerned, destined for the EU, again represent only a small proportion of their production.
On the other hand, the report questions the compatibility of the CBAM with World Trade Organization (WTO) rules.
As a result, and with the WTO’s Appellate Body paralysed, the author of the report fears retaliation by countries negatively affected by the CBAM. “The EU should be more realistic about the downstream retaliatory consequences of CBAM”, says Erixon.
Finally, he recommends that the EU provide compensatory measures for developing countries that will be negatively affected by the CBAM. This echoes numerous comments on this subject by the European Parliament or other think tanks such as Europe Jacques Delors (see EUROPE 12763/24) or Sandbag (see EUROPE 12780/8).
See the ECIPE report: https://bit.ly/3EIfkJp
Need for a global system
At COP26, WTO Director Ngozi Okonjo-Iweala also took up the issue, at a high-level event on carbon pricing hosted by Canada on 2 November. She once more promoted a globally coordinated approach to carbon pricing. “Let’s move towards a global carbon price. We have a great deal of fragmentation and we are hearing increasingly from businesses that they are finding regulations difficult to navigate, and sometimes it results in higher prices for consumers and others. We also have members who are afraid this measure is somehow disguised protectionism which will prevent them from selling products abroad. Their issues need to be respected as we develop these systems”, she said.
At the same event, the President of the European Commission, Ursula von der Leyen, defended the European initiative. “If we would live in a perfect world, I would love to have a global price”, she said. But until then, “this does not prevent the leading countries from acting more quickly”. (see EUROPE 12824/1). (Original version in French by Léa Marchal)