The first of a potentially long series of inter-institutional meetings (‘trilogues’) was held on Monday 11 July on the Carbon Border Adjustment Mechanism (CBAM). “The upcoming negotiations will be intense”, warned EU Taxation Commissioner Paolo Gentiloni. The first meeting, which lasted for just one hour, allowed the institutions to present their positions and identify issues to be delegated to the technical level, according to one source.
A second political trilogue is not expected to take place before the end of September, according to this source, while technical meetings are expected to be held this summer. Paolo Gentiloni has indicated that he wants to reach an agreement by the end of the year, so that the CBAM in its transitional form can enter into force in early 2023.
The European Council and the Parliament have the difficult task of agreeing on the phasing out of free emission allowances for the sectors covered by the CBAM. The Member States are in favour of a complete phase-out in 2036 (see EUROPE 12911/14), while the European Parliament advocates an end to these free quotas in 2032 (see EUROPE 12977/12).
In a new ‘position paper’ published on 11 July, the Europe Jacques Delors think tank has again stressed the need to quickly abolish free allocations of emission allowances.
It also indicates that the export rebates proposed by Parliament for CBAM-affected companies are likely to be challenged by the World Trade Organization (WTO). Again, this is an important point in the discussions where negotiations are likely to be difficult, according to a second source.
Reform of the carbon market is also going to be difficult
On the same day, the Parliament and the European Council also started the trilogues on the revision of the EU Emissions Trading System (see EUROPE 12982/6, 12977/10).
According to one source, these initial exchanges have confirmed that the abolition of free emission allowances (also addressed in the CBAM text and mentioned above) and the introduction of a second ETS covering greenhouse gas emissions from space heating and road transport are the two most divisive issues.
“While it is important that we agree in principle, on many quite significant points there is a need for quite intensive negotiations”, acknowledged the Parliament’s rapporteur on the ETS review, Peter Liese (EPP, Germany). (Original version in French by Damien Genicot and Léa Marchal)