The final contours of the draft report by Mohammed Chahim (S&D, Netherlands) on the EU’s carbon border adjustment mechanism (CBAM) are taking shape in the European Parliament. The Committee on the Environment, Public Health and Food Safety (ENVI) will vote on the text on Tuesday 17 May. Some fifteen compromise amendments, which EUROPE has been able to consult, have been drawn up between the various political groups.
Most of these amendments are in line with the position proposed by Mr Chahim a few months ago (see EUROPE 12862/3). However, a major change has crept into the text regarding the use of CBAM revenues. MEPs want to translate them into own resources for the EU budget. They add that the EU should nevertheless financially support the climate transition of the least developed countries. This should be done through the Neighbourhood, Development and International Cooperation Instrument (NDICI), according to them.
The use of CBAM revenues is the subject of recommendations by several think tanks and NGOs, which warn that the EU would run the risk of non-compliance with World Trade Organization (WTO) rules if the co-legislators decide to direct CBAM revenues to the EU budget (see EUROPE 12895/5).
The rapporteur also argued for the revenues to be directed directly to the adaptation of industrial capacities in the least developed countries. “This compromise is not perfect, but it is acceptable”, he said at a debate organised by the Oxfam organisation on Tuesday 10 May. He added that the Parliament’s Committee on Budgets was very strict on the specific allocation of own resources.
On the other hand, the least developed countries are not exempt from the mechanism, depending on the compromises reached between the groups. Mohammed Chahim considers that this would not be the right political signal to send, and that there is no majority on this point in any case.
Scope
The compromise amendments include the rapporteur’s proposal to extend the scope to organic compounds and polymers. The same applies to the inclusion of indirect emissions from electricity consumed in the production of goods, heating or cooling in the calculation of emissions embedded in products.
On the sectors covered, however, MEPs add that by 2030, CBAM should apply to all sectors covered by the greenhouse gas Emissions Trading System (ETS). It will be up to the European Commission to establish a timetable for the progressive inclusion of these sectors by 2030.
End of free allowances
MEPs compromised on a date - the year 2030 - for the total abolition of the free allocation of ETS allowances in the sectors covered by CBAM.
The rapporteur initially proposed 2028 in his first draft report, while the European Commission proposed 2036. In their compromise amendments, the political groups propose that the volume of these quotas should fall to 90% in 2025, 80% in 2026, 70% in 2027, 50% in 2028 and 25% in 2029, reaching zero in 2030.
This issue is also being discussed in the context of the ETS revision.
Operation and entry into force
The CBAM mechanism should come fully into force on 1 January 2025, after a two-year transitional period, according to MEPs. The European Commission had proposed a three-year transition period.
Unsurprisingly, MEPs agree on the need for a central authority to manage importer authorisations and CBAM certificates.
They add a new feature: a force majeure clause that would allow the European Commission - “on the occurrence of an unforeseeable, exceptional and unprovoked event outside the control of one or more third countries subject to CBAM, which has destructive consequences on the economic and industrial infrastructure of the countries concerned” - to analyse the situation and propose legislation to amend the CBAM Regulation so that provisional measures can be applied to take account of these exceptional circumstances.
The report and its amendments will be put to a vote on 17 May, at the same time as the report on the ETS. (Original version in French by Léa Marchal)