Carbon border levy should be in place no later than 2023, EU lawmakers say

The levy will be a major political and democratic test for the EU, said Yannick Jadot, rapporteur for the opinion [JAN VAN DE VEL / EP]

Lawmakers in the European Parliament on Friday (5 February) backed a levy on carbon-intensive products imported into Europe, calling on the European Commission to introduce a so-called “carbon border adjustment mechanism” as quickly as possible.

In a resolution adopted on Friday (5 February), the European Parliament’s environment committee emphasised the need for the levy to be WTO-compatible and introduced no later than 2023.

“A carbon border adjustment mechanism should cover all imports, but as a starting point already by 2023, it should cover the power sector and energy-intensive industrial sectors like cement, steel, chemicals and fertilisers,” reads the opinion.

The resolution sees the levy as a way to decarbonise in Europe and beyond by exposing imported goods to the same carbon costs faced by EU manufacturers.

“Goods imported to the EU have to bear the same cost of carbon emissions as the ones produced in Europe. Otherwise, we will not be able to reduce Europe’s carbon footprint,” said Adam Jarubas, a Polish MEP who was one of the co-authors of the resolution for the centre-right European People’s Party (EPP).

“It is a major political and democratic test for the EU, which must stop being naïve and impose the same carbon price on products, whether they are produced in or outside the EU,” added Yannick Jadot, a French lawmaker who was the Parliament’s rapporteur for the resolution.

The levy will “ensure the most polluting sectors also take part in fighting climate change and innovate towards zero carbon,” said Jadot, who is from the Green political group in Parliament.

The resolution includes several conditions to make sure the levy effectively increases climate ambition. Among those, it should be linked to a reformed emissions trading scheme (ETS) and avoid protectionism. And the money raised should be used for climate objectives in the EU and internationally.

“This mechanism should serve to better address greenhouse gas emissions embedded in international trade, thereby incentivising climate action both within the Union and by our trading partners, and not as an instrument for protectionism,” it reads.

Although emissions within the EU are decreasing, those from products imported into the bloc have been rising.

“The European Union has to take responsibility for the greenhouse gas emissions it produces and those which, increasingly, it imports,” says the resolution.

MEP Canfin: EU’s carbon border adjustment mechanism 'is not a tax'

The European Union’s future carbon border adjustment mechanism must mirror the EU’s own carbon market price and structure in order to be compatible with WTO rules, says Pascal Canfin.

End of free allowances

The European Commission will table its plan for the carbon border adjustment mechanism in June and is expected to start with energy-intensive industrial sectors like steelmaking and cement.

These represent 94% of the EU’s industrial emissions and receive free allocations under the bloc’s emissions trading scheme, which allows them to pollute without paying.

The introduction of the new border levy must take place in parallel with a gradual phase out of these free allocations over the next decade, the Parliament resolution says. As the levy increases its coverage, the free allowances for emissions will be eliminated entirely.

“A carbon border adjustment mechanism should cover all imports, but as a starting point already by 2023 it should cover the power sector and energy-intensive industrial sectors like cement, steel, chemicals and fertilisers, which continue to receive substantial free allocations, and still represent 94% of Union industrial emissions,” according to the opinion.

“No climate policy can be labelled ambitious unless it slashes carbon allowances, abolishes the free allowances hobbling the carbon market, and sets a floor price for each tonne of CO2,” it continues.

Environmentalists agree. “This is a clear call for closing a loophole that shields the vast majority of carbon-intensive industries from paying for the climate damage it causes,” said Doreen Fedrigo, a campaigner at Climate Action Network Europe.

However, Jarubas warned that the phase out of free allowances under the ETS must be done carefully, to avoid companies relocating abroad to places where the cost of pollution is cheaper.

“Both systems, free emission allowances and the carbon border adjustment mechanism, should work simultaneously. The latter cannot sufficiently protect the competitiveness of European exporters on its own,” he said.

But this rapid phase out has been criticised by the European Conservatives and Reformists (ECR), all of whom voted against the opinion.

“The rapid phase-out of free allowances would risk investor certainty,” a spokesperson told EURACTIV, adding that the quick phase out of free allowances could be a dramatic hit to industry and has not gone through a proper impact assessment.

“The ECR is convinced that the EU should advocate for a reliable policy, especially when it concerns the investments needed to reach the 2050-target,” they added.

The European Parliament is expected to vote on the resolution during a plenary session in March. The Commission will then present a proposal for the levy in June.

EU carbon border levy shaping up as 'notional ETS'

Revenues from the European Union’s upcoming carbon border charge will be “recycled” to replenish the EU budget and finance the bloc’s green transition, senior officials have said. However, this won’t be the main goal, they cautioned, saying the new levy must pursue environmental objectives to comply with WTO rules.

[Edited by Frédéric Simon]

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