Carbon Border Adjustment Mechanism (CBAM)

Key points

• The EESC welcomes the Commission proposal to set a Carbon Border Adjustment Mechanism (CBAM) with the aim of raising awareness on the EU climate ambition and to establish a level playing field within the Single Market.

• The EESC calls for the impact assessment to be extended to the export activities of the sectors included in the scope of the CBAM. The EU must continue to pursue its climate ambition but, at the same time, it needs to guarantee European industry a level playing field in the international arena by enabling it to compete in the single market and export to international markets.

• The EESC encourages EU legislators to explore how to handle exports in order to allow EU industry to remain competitive in international markets. The EESC recommends an impact assessment to find out how the WTO rules must be interpreted or adapted in such a way that they support the goals and efficiency of the CBAM in order to contribute to the avoidance of industrial CO₂ emissions worldwide.

• Many important topics will need further development through delegating acts for implementation. Therefore, considering this point together with the previous one, it is almost impossible to figure out what the consequences of implementation will be for each manufacturing sector. Doubts about several key details of the proposed Regulation make it difficult to assess it until the legislative process has progressed further. However, uncertain framework conditions must be avoided, especially when assessing CO₂ for imports, so as not to undermine the proactive and anticipatory measures taken by European companies to protect the climate.

• The EESC asks European legislators to directly allocate revenue from the CBAM to support the industrial transition of the affected sectors. Some economic sectors suffering from unfair climate competition might need additional support, in recognition of their efforts, as they might become less competitive against those which do not internalise the climate/environmental footprint.

• The EESC prompts the European Union to help less developed countries improve their technological capabilities, to avoid the risk of CBAM circumvention.

• A sound verification of the actual emissions embedded in imported products will be key to a fair deployment of the CBAM. The EESC recommends that the Commission set specific requests to authorised verification bodies.

• The Committee notes the need for a strong industrial footprint in Europe which is fully competitive, and climate responsible.

• At the same time as the legislative procedure, the Commission is requested to carry out an impact study on the possible effects of the CBAM along the value chain, as a consequence of its implementation.

• The introduction of CBAM would cause a major change in the world trading system. The EU must take all necessary steps to ensure that CBAM does not lead to an increase in GHG emissions in other parts of the world with the potential for extra global emissions. The CBAM must not in any way lead to the deindustrialisation of the EU. The EU must balance its climate ambition with the real fact that reducing greenhouse gas (GHG) emissions is a global issue.

• The political dimension of the CBAM has not been sufficiently highlighted. The final decisions regarding the CBAM will largely be based not only on discussions within the EU but also on the negotiations that will be necessary with trading partners to agree on an outcome and avoid a trade conflict.

• The EESC has a reasonable expectation that a functioning CBAM system will make employment in the climate-friendly transformed former CO₂-intensive companies and sectors more robust. However, it also warns of the risk of failure of the CBAM, in conjunction with the ETS system. The complete abolition of free allocation with the introduction of the CBAM could lead to major job losses in the EU.

• The CBAM will support both the EU climate ambition and a stronger future industrial footprint in Europe. Obvious risks, such as difficulties in the verification of provided information about CO₂ emissions from third countries and possible circumvention must be taken into account when implementing the CBAM, during and after the transition period.

• Under the current circumstances, with the urgency of fighting climate change, it is key that the renewed WTO include the environmental and climate scope in its agenda. The EU could use the CBAM as an opportunity to launch this debate, together with other trade partners within the WTO.