Learning from CBAM’s Transitional Phase: Early Impacts on Trade and Climate Efforts

Summary:

The EU applies a carbon price to its heavy industry through its Emissions Trading System (EU ETS). To prevent carbon leakage – the flight of carbon-intensive industry away from the EU and towards countries with looser environmental regulation – the EU opted to largely exempt its heavy industry from the ETS carbon price. The introduction of the Carbon Border Adjustment Mechanism (CBAM) changed the EU’s strategy by applying carbon pricing both to domestic production and to foreign producers who sold in the EU, which allowed it to level the playing field. CBAM applied to importers of a subset of goods from outside the EU: iron and steel, cement, aluminium, fertilisers, electricity and hydrogen. The author comments that the EU could not simply focus on clean industrial policy at home and not lead the industrial revolution abroad: the Commission should make concrete support for industrial decarbonisation, from financial support to technology transfer, a key part of its climate diplomacy and external investment strategy.

• Alternative Source 1

ESO Records

OJ L 130, 16/05/2023: Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism https://www.europeansources.info/record/proposal-for-a-regulation-establishing-a-carbon-border-adjustment-mechanism/

Energy Strategy Reviews, vol. 51, Jan. 2024: Small and large friends of the EU’s carbon border adjustment mechanism: Which non-EU countries are likely to support it? https://www.europeansources.info/record/small-and-large-friends-of-the-eus-carbon-border-adjustment-mechanism-which-non-eu-countries-are-likely-to-support-it/

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