- #Be a storm in a teacup full
- #Be a storm in a teacup trial
Potential extensions could increase that share to 5% in an extreme scenario.Īmount of Chinese exports of goods to the EU27 in value covered by CBAM (2019) The sectors covered by the current CBAM proposal represented 1.8% of Chinese exports to Europe in 2019, in value.
The impact of the likely CBAM scenario on Chinese exports to the EU is minimal.
#Be a storm in a teacup full
The full price signal of the CBAM will not be applied to importers of goods from the EU’s trading partners until 2035 when free allocation is proposed to be fully phased out.
#Be a storm in a teacup trial
The trial period will run between 2023-2025 during which importers would not face extra cost from the CBAM.
The legislative timeline suggests that the CBAM will come into force earliest in the beginning of 2023, following scrutiny and political discussions by the European Parliament and the Council, with consultations by the European Commission with trade partners. A three-year trial period will exempt importers of any charge. The current proposal envisions a narrow sectoral scope, covering direct emissions only (“scope 1” emissions), with the possibility to submit verified calculations or use default values and with revenues envisioned for EU own resources without earmarking. However, no matter which design will be chosen for the final CBAM, the EU institutions have stressed the importance of compliance with WTO rules. Choices include: the sectoral and emissions scope, compliance instruments, carbon content assessment, possible exemptions, the use of revenue and the treatment of the EU’s exports regarding possible discounts on their carbon costs. There are different design options for the CBAM. Some European stakeholders see the CBAM as a way to prevent ‘carbon leakage’ others see it as a way to drive climate ambition globally a means to raise new revenues, by replacing the handing out of free allowances to EU industries under its emissions trading scheme (ETS) a way to raise the price of polluting products in the internal EU market to make less polluting products more competitive others, especially some industry stakeholders, view the measure as a solution to address their competitiveness concerns linked to rising climate ambition in the EU. Different EU actors associate a range of different objectives with the CBAM. However, the motivations of the EU’s CBAM are multi-faceted. Against the background of tightened EU scrutiny on foreign investment and trade, CBAM has been interpreted by some of the EU’s trading partners as a tool to protect the single market disguised as climate policy. The EU’s CBAM proposal comes at a time of increased international trade tensions, which the EU aims to tackle through a variety of trade policy instruments. But the overall impact is likely to be small as the current proposal only covers a small share of Chinese exports to the EU, and importers will recover most of the additional costs through higher prices in EU markets. The CBAM, if implemented in its current proposed form, will raise the cost for EU importers of some Chinese goods to access the European market. 
These competing views will be brought to bear in the legislative process to come and will impact the final design of the CBAM, which is due to be fully implemented by 2026 following a three-year transition phase beginning in 2023. The introduction of a CBAM was first presented by the European Commission as “an alternative to the measures that address the risk of carbon leakage in the EU’s Emissions Trading System”.ĭifferent stakeholders, including policymakers in the European Commission and EU Member States, the European Parliament, industries, and EU’s trade partners, hold different positions on what the CBAM should try to achieve. This is part of the ‘Fit for 55’ package, a group of 12 directives and regulations aiming to achieve 55% emissions reductions compared to 1990 levels. On 14 July 2021, the European Commission put forward its proposal for a carbon border adjustment mechanism (CBAM), a mechanism that would put a carbon levy on imports of certain emission-intensive products from third countries into the EU. The impact of the likely CBAM will be minor: the CBAM only covers 3.2 percent of goods imported into Europe, but 47 percent of the free emission allowances currently given to industry. The following report, written in partnership with Sandbag, assesses the impacts and risks of the EU’s proposed carbon border adjustment mechanism (CBAM).
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