EU Carbon Border Measure, Latest news

CBAM – New coalition in European Parliament sees majority position emerging

A “progressive majority” of MEPs in the European Parliament’s environment committee this week backed a shorter and earlier phase-in of the European Commission’s proposed carbon border adjustment mechanism, a levy on CO2 on a range of imported products.

At an NGO event today (11 May), German Green parliamentarian Michael Bloss said that four political groups – S&D, the liberal Renew Europe, the Greens, and the Left – had agreed that the free allocation of emission allowances for sectors in the scope of the CBAM would be gradually phased out between 2025 and 2030.

The CBAM, whose transition phase is due to start in 2023, would be gradually phased in during this same period and would be fully operational for these sectors from 2030.

This phase-in would be synchronised with a phase-out of free CO2 trading allowances offered to about one third of EU domestic industry under the bloc’s Emissions Trading Scheme, to which CBAM would be tied.

In its original proposal the commission tabled a phase-out of free ETS allowances and the phase-in of CBAM to take place over a ten-year period from 2025 to 2035.

The environment committee is scheduled to vote on its report on the CBAM and the revised EU emissions trading scheme early next week, with a plenary vote foreseen for July.

In March EU finance ministers reached a consensus on the CBAM but preferred to leave the issue of the timeline to their environment counterparts who are due to meet at the end of June. Once finalised in the council, trilogue discussions with the parliament and commission will begin.

The EU’s carbon border levy would oblige EU importers of cement, electricity, fertilisers, iron & steel, and aluminium from third countries to purchase annual emission allowances to ensure they pay the same price for their carbon as domestic EU producers. The proposal’s objective is to prevent the phenomenon of carbon leakage, whereby industries move to less strict jurisdictions on CO2 emissions.

Bloss, who acts as the Greens’ climate and industry policy spokesman in the parliament as well as being the shadow rapporteur on the revision of the EU emissions trading scheme, told Borderlex that he believed number of MEPs supporting a faster phase-in of CBAM would outnumber those from the EPP and other right-leaning parties who favour a longer lead-time for the phase-out of free allocations.

Industry associations have also been lobbying  for free allocation and CBAM to co-exist, at least until the latter has proven it can halt carbon leakage. Environmental groups counter that this would be tantamount to double protection for EU industry and would be in breach of World Trade Organization rules.

“The proposals now on the table are a success for the climate, industry and Europe’s citizens,” said Bloss.

“We are ensuring that the European Union keeps its promise to the Paris climate agreement, supports industry in the transformation and makes everything socially just. Emissions trading thus becomes Europe’s strongest climate lever and is win-win-win. This was not an easy task, but we have succeeded and I am glad about that.”

As part of the agreement, the political groups also want other sectors under the EU ETS to begin losing their free allocations from 2030 and for the additional income resulting from the withdrawal of free allocations to go towards the EU’s newly christened Climate Investment Fund, previously the Innovation Fund, which funds low carbon technologies.

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