- The European Union plans to expand its Carbon Border Adjustment Mechanism to some assembled goods such as cars and washing machines to help close loopholes.
- The EU introduced CBAM to safeguard its industry during an ambitious shift to net zero by 2050 and prompt other parts of the world to make their output greener.
- The EU will propose measures to extend the levy to selected steel and aluminium-intensive downstream products, and will also unveil a proposal on how to support its own exporters via a new fund.
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The European Union plans to expand an incoming emissions charge on imported goods as part of efforts to strengthen a flagship climate policy that’s aimed at protecting the bloc’s industries during the green shift.
The EU has pressed ahead with its Carbon Border Adjustment Mechanism — which covers six emissions-intensive sectors — despite criticism from trading partners from the US to China. On Wednesday, it plans to propose measures to extend the levy to some assembled goods such as cars and washing machines to help close loopholes, according to a draft.
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The EU introduced CBAM to safeguard its industry during an ambitious shift to net zero by 2050 and prompt other parts of the world to make their output greener. The idea is that carbon-intensive sectors forced to comply with the bloc’s world-leading climate laws won’t face unfair competition from producers operating in nations with weaker rules. It comes amid concerns that Europe is deindustrializing under the strain of high energy prices and the green transition.
“The overall objective of the legislative proposal is to strengthen the effectiveness of CBAM, thus reducing greenhouse gas emissions and fighting climate change globally,” the EU says in the draft proposal, which is still subject to change. “This proposal will extend the scope of CBAM to selected steel and aluminium-intensive downstream products.”
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As of January this year, dozens of carbon-trading systems were in force globally, covering almost a fifth of global emissions, according to a report by non-profit organization IETA. Under EU rules, the fee importers will need to pay could be at least partially waived if a carbon levy has already been paid in the country where the goods were produced.
“The CBAM is deeply unpopular among major exporters to the EU, but it has already proven to be effective in pushing reticent countries toward building or expanding carbon-pricing efforts,” said Henry Lush, a carbon analyst at consultants Veyt.
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The European Commission on Wednesday will also unveil a proposal on how to support its own exporters via a new fund filled with a quarter of the proceeds collected from the levy over the next two years, according to a draft seen by Bloomberg. In addition, it will present detailed rules on calculating fees that importers will have to pay at the border, and measures to prevent circumvention.
The fees companies will have to pay will largely depend on the so-called default values, which will effectively set a price list for emissions when importers can’t provide verified, installation-specific data at the border, according to Robert Jeszke, head of Poland’s emissions management authority.
“In the early years, the most immediate behavioral effect is likely to be improved monitoring and verified reporting, rather than instant deep decarbonization across the board,” he said. “But CBAM’s financial materiality will rise over time.”
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