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EU to announce Carbon Border Adjustment Mechanism proposal
Kind: ICD What's New  Organization: Department of International Cooperation  Publish Date: 2021-07-07 16:09
In order to avoid "carbon leakage" whereby industries relocate production to places with laxer climate policies to avoid those costs, the European Commission is set to propose the Carbon Border Adjustment Mechanism (CBAM) with the aim of realizing the goal of maintaining the competitiveness of EU industries and urging trading partners to reduce their carbon emissions.

The CBAM proposal, slated to be announced July 14, 2021, is a key element of the European Green Deal which the European Council decided to move forward with in December 2019. The mechanism is expected to be applied in full from 2026, with a possible transition period beginning in 2023.

According to a report by Reuters, the EU plans to impose carbon emission costs on imports of goods including cement, electricity, fertilizers, iron and steel, and aluminum. Importers will have to purchase electronic CBAM certificates at prices corresponding to those in the EU Emissions Trading System.

The draft also stated that a CBAM Authority would be formed to be responsible for the mechanism’s administration, including authorization of declarants that are entitled to import goods, accreditation of verifiers, review of CBAM declarations, and management of CBAM certificates.

CBAM is a foundation of the EU’s industrial strategy and green diplomacy. With carbon prices surging above 50 euros (US$60) per metric ton, production costs in the EU will not be able to compete with those outside the region. Analysts have said that without the mechanism, European industry will be crushed between rising carbon costs at home and environmental dumping from abroad.

Sources: Reuters、Bloomberg Green、Mayer Brown website

Update: 2020-04-23
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