MEP and rapporteur on the Carbon Border Adjustment Mechanism (CBAM), Mohammed Chahim (S&D, Netherlands), submitted, on Wednesday 5 January, his draft report to the shadow rapporteurs (see EUROPE 12862/3). The report calls for a broadening of the sectors covered by the mechanism and for its early entry into force.
Environmental organisations and movements welcomed this announcement, such as the NGO German Watch or the Institute for European Environmental Policy. They also welcome the MEP’s proposal for a rapid phase-out of the free allowances allocated to European companies under the Emissions Trading System (ETS).
Members of the Committee on the Environment, Public Health and Food Safety (ENVI) have until 10 February to submit their amendments to the text, before voting in committee in May. The rapporteur hopes for a plenary vote in June.
In an interview with EUROPE, he discusses the content of his report.
Do you expect your colleagues in the European Parliament to lower their ambitions on this text?
We have to see, but it must be understood that I have consulted widely with my colleagues. I took their ideas and I think my report is the result of these discussions. I also consulted many NGOs, organisations representing various interests.
I think it is important above all to send a strong signal from the European Parliament on this text, and also to be in line with the climate law.
Of course, we have to look at the details, see how we can adjust some things. Some groups in the European Parliament may want to make the mechanism more flexible, but others will certainly want it to be even stricter. I am thinking in particular of the inclusion of refineries in the sectors covered by CBAM.
Why did you choose in your report to add hydrogen, polymers and organic compounds, but not refineries among the sectors covered by CBAM?
We worked hard to finish the report before Christmas, so that the linguists could work on it and I could pass it on to my colleagues quickly. And at this point I have not yet found the solution to include refineries in the sectors covered. However, I think that CBAM should cover those sectors that are highly prone to carbon leakage and whose manufacturing process is CO2 intensive. In the best case scenario, polymers, chemicals and refineries would be covered by CBAM. We now need to see how this can be implemented in a practical way.
What do the organisations you met with think about an earlier entry into force of CBAM (2025 instead of 2026) and an earlier exit from free allocation of ETS allowances (2028 instead of 2036)?
Even before the own-initiative report to the European Parliament on CBAM, European industries were very excited about the idea of the mechanism, but at the same time they wanted to keep the free allowances. But you can’t have your cake and eat it too. Free allocations of allowances were introduced to prevent carbon leakage. CBAM is doing exactly the same thing. As long as free allowances are in place, the polluter pays principle will not be respected and the carbon price signal will be upset.
If we want a strong CBAM, we must abolish free allowances as soon as possible. It is also about convincing our business partners.
The European Commission’s proposal in July 2021 leaves a total of 15 years to phase out free allowances. I propose seven years, which should be sufficient.
Do you think you can convince the industry that the loss caused by the end of free allowances can be compensated by European support for innovation?
We create laws on the basis of what people voted for. I have the democratic legitimacy to make such proposals. Ultimately, we want and need to decarbonise the economy. I think it is unacceptable that some sectors have a much better environmental performance in neighbouring countries than the same sectors here. This is because of the free allowances.
On the question of the resources generated by CBAM, how can we be sure that the equivalent of these revenues will be redistributed to the least developed countries through existing funding programmes?
I agree with the request of the European Parliament’s Committee on International Trade (INTA) that the Commission should provide the European Parliament with an annual analysis of the countries supported with the funds collected. It will be our role to ensure that the rules are applied and the funds redistributed.
I think we absolutely have to make sure of that. It is our moral duty to support the least developed countries in decarbonising their industry.
See the draft report: https://bit.ly/3eQ31zU (Original version in French by Léa Marchal)