The European Parliament Committee on Environment, Public Health and Food Safety (ENVI) has adopted its report on the EU Carbon Border Adjustment Mechanism (CBAM), one of five reports of the “Fit for 55 in 2030 package”, the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55 percent by 2030 compared to 1990 levels and have net-zero GHG emissions (climate neutrality) by 2050 in line with the European Climate Law.
The five reports of the “Fit for 55 in 2030 package”, adopted by ENVI on May 17, 2022, include the Emissions Trading System (ETS) along with a report on the revision of the ETS as regards aviation, the EU Carbon Border Adjustment Mechanism (CBAM), Effort Sharing Regulation (ESR), and land-use, land-use change, and forestry (LULUCF).
According to a statement on May 17, 2022, the adopted package is “an important step towards the EU’s goal to become independent from expensive and polluting fossil fuels from Russia well before 2030.”
Call for higher ambition in CBAM
MEPs call for a broader scope and faster implementation of the EU Carbon Border Adjustment Mechanism (CBAM) to raise global climate ambition.
The report on the regulation establishing a Carbon Border Adjustment Mechanism (CBAM) was adopted with 49 votes for, 33 against, and 5 abstentions.
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.
Broadening the scope of CBAM
MEPs want CBAM to cover aluminium, hydrogen, polymers, and organic chemicals in addition to the products proposed by the European Commission which included iron and steel, refineries, cement, organic basic chemicals, and fertilizers.
To better reflect carbon dioxide (CO2) costs for European industry, MEPs also want to extend CBAM to include indirect emissions, i.e. emissions deriving from the electricity used by manufacturers
Phasing in CBAM and out free allowances in ETS
The CBAM would apply from January 1, 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.
Furthermore, and to avoid double protection, any free allowances granted to EU industries in the ETS, to address the risk of carbon leakage in the absence of a fair level playing field, should be fully phased out by 2030 when CBAM kicks in fully for the protected industries.
MEPs stress that coherence between the CBAM and the EU ETS is essential to respect the principles of the World Trade Organisation (WTO) and that CBAM must not be misused as a tool to enhance protectionism.
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, and also help to combat “forum shopping” from importers.
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.
This support would help meet the EU’s climate objectives and international commitments, such as the Paris Agreement.
Today’s vote is a great step in the right direction as it improves the Commission’s proposal to set up an ambitious and future-proof CBAM that will be a crucial pillar of European climate policies. Adopting the CBAM will be win-win for Europe, as it will be an important mechanism to incentivise our trading partners to decarbonise their manufacturing industry and at the same time allow us to fully apply the polluter pays principle to our own industry, commented rapporteur Mohammed Chahim (S&D, NL).
All these reports, including those on CO2 emission standards for cars and vans and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), adopted on May 11, 2022, are scheduled for a vote during the June 6-9, 2022 plenary session, after which Parliament will be ready to start negotiations with EU governments.
The European Parliament’s position on the Market Stability Reserve for the ETS was adopted by the Plenary in April 2022.
