The Europe Jacques Delors think tank is advising EU co-legislators to take into account compatibility with World Trade Organization (WTO) rules in a new policy paper on the Carbon Border Adjustment Mechanism (CBAM), which was published on Friday 18 February.
In their opinion, free allocations under the Emissions Trading System (ETS) cannot continue once CBAM is in force. “This will be seen as double compensation for those industries receiving these free allowances”, which is illegal, stated the paper.
Secondly, the non-exemption from the CBAM for those least developed countries is likely to create friction, they believe, thereby evoking the principle of common but differentiated responsibilities, which is so important to the WTO.
Finally, they emphasise the fact that at least some of the revenue from CBAM should be directed towards least developed countries. If this is not the case, the future mechanism will be perceived by the international arena as a tax measure and may contravene WTO rules.
Europe Jacques Delors also strongly recommends that dialogue with global partners is the best way to share the CBAM idea. This requires both bilateral and multilateral engagement, according to the think tank.
The authors also welcome the fact that the rapporteur of the text in the European Parliament’s Committee on the Environment, Mohammed Chahim (S&D, Netherlands) (see EUROPE 12862/3), and the rapporteur of the draft opinion report for the European Parliament’s Committee on International Trade, Karine Karlsbro (Renew Europe, Sweden), are in broad agreement with the recommendations they made in 2021 (12874/12).
See the Europe Jacques Delors policy paper: https://aeur.eu/f/f3 (Original version in French by Léa Marchal)