On Tuesday 17 May, MEPs on the Committee on the Environment, Public Health and Food Safety (ENVI) adopted (49 votes in favour, 33 against, 5 abstentions) the draft report introducing a carbon border adjustment mechanism (CBAM) from 2025. Rapporteur Mohammed Chahim (S&D, Netherlands) welcomed the adoption of all the compromise amendments that EUROPE had detailed in a previous bulletin (see EUROPE 12949/14).
Some of these compromises were not supported by the largest political group, the EPP. This was the case with the amendments to phase out free allowances for CBAM products by 2031, which are allocated under the EU’s Emissions Trading System (ETS).
Supported by the ECR group, the EPP group, led by the rapporteur on the ETS review, Peter Liese (Germany) (see other news), wanted a slower phase-out of these free allowances. The compromise amendment in question was adopted with 46 votes in favour, 40 against and 2 abstentions.
Similarly, the Parliament’s ENVI Committee favours a full entry into force of CBAM as early as 2025, and not 2026 as initially proposed by the European Commission (see EUROPE 12762/5). The European Commission had envisaged a three-year period between 2023 and 2026 during which certain CBAM obligations would not yet be implemented, such as the payment of CBAM certificates for importers.
MEPs also want to extend the scope of CBAM to cover organic compounds, hydrogen and polymers (a class of materials made up of macromolecules), in addition to imports of cement, electricity, iron, steel, aluminium and fertiliser.
Finally, another sensitive point in the discussions concerned the use of revenues from the future mechanism. The rapporteur and other groups on the left of the Chamber wanted the revenues generated to be used to reimburse the operating costs of CBAM and then to be devoted entirely to helping the least developed countries (LDCs) to make a success of their climate transition.
They should not be exempted from CBAM, according to MEPs, who therefore wanted to provide compensation. However, after a divergent opinion from the Parliament’s Committee on Budgets and some groups, a compromise was found to finally allocate CBAM resources to the EU budget, while still promising assistance to vulnerable third countries through other financial instruments.
Several think tanks had warned that such a use of the resources generated would violate World Trade Organization (WTO) rules.
“I think most of the lawyers in the European Commission and those who advise us are convinced that this solution is compatible with WTO rules”, Mohammed Chahim told EUROPE. He also expressed confidence that there would be sufficient guarantees for the funds to go to developing countries. “We put it in the legislation, we are quite explicit. Of course, this will have to go through the Committee on Budgets, but we will be there to defend what has been decided”, he stressed.
The Parliament will vote on the draft ‘Chahim’ report in early June during the plenary session in Strasbourg.
In March 2021, the Parliament adopted the own-initiative report by Yannick Jadot (Greens/EFA, France) on CBAM. An EPP group amendment was adopted at the last minute in plenary to reduce the ambitions on the phase-out of free allowances (see EUROPE 12675/8).
See the compromise amendments adopted: https://aeur.eu/f/1oj (Original version in French by Léa Marchal)