Higher Ambition in Proposed CBAM: The EU Carbon Tax

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In a press release yesterday (May 17, 2022), the Committee on Environment, Public Health, and Food Safety adopted their report on the regulation establishing a Carbon Border Adjustment Mechanism with 49 votes for, 33 against, and 5 abstentions.


Carbon Border Adjustment Mechanism, a proposal to put a carbon price on imports of a targeted selection of products so that ambitious climate action in Europe does not lead to ‘carbon leakage’.


Members of the European Parliament (MEPs) agree on the need for a CBAM to reduce global carbon emissions by incentivizing the reduction of emissions in non-EU countries and to prevent the risk of carbon leakage, i.e. the moving of production outside the EU in countries with laxer climate policies. However, MEPs propose a number of changes to increase climate ambition, including:


  • Broadening the scope of CBAM: The scope should be extended to include organic chemicals, plastics, hydrogen, and ammonia as well as indirect emissions; in addition to the products proposed by the Commission (iron and steel, refineries, cement, organic basic chemicals, and fertilizers).


  • Phasing in CBAM earlier and ending free allowances in ETS: The CBAM would apply from 1 January 2023 with a transitional period until the end of 2024 and MEPs say it must be fully implemented for all sectors of the EU Emissions Trading System (ETS) by 2030 - 5 years earlier than proposed by the Commission. And to address the risk of carbon leakage in the absence of a fair level playing field, any free allowances granted to EU industries in the ETS should be fully phased out by 2030 when CBAM kicks in fully for the protected industries.


  • Need for a centralized EU CBAM authority: Rather than having 27 competent authorities, MEPs believe there should be one centralized EU CBAM authority, which would be more efficient, transparent, and cost-effective.


  • EU budget should support the least developed countries through amounts equivalent to sums collected through CBAM: MEPs want the revenues generated by the sale of CBAM certificates to go to the EU budget. They add that the EU must provide financial support, at least equivalent in financial value to the revenues generated by the sale of CBAM certificates, to support least developed countries' efforts towards the decarbonization of their manufacturing industries.


  • Next steps: The report is scheduled for a vote at the plenary session on 6-9 June after which Parliament will be ready to start negotiations with member states.

Link to press release: //www.europarl.europa.eu/news/en/press-room/20220516IPR29647/cbam-meps-push-for-higher-ambition-in-new-carbon-leakage-instrument