Proposal for a Regulation establishing a carbon border adjustment mechanism

Summary:

Legislative initiative tabled by the European Commission on 14 July 2021 establishing a new Carbon Border Adjustment Mechanism (CBAM). This is a text with EEA relevance.

Further information:

The European Commission first announced its intention to propose a CBAM in its Communication setting out the European Green Deal, applicable to selected sectors to reduce the risk of carbon leakage. The mechanism aims to ensure that the price of imports reflect more accurately their carbon content, should differences in levels of ambition worldwide persist. This measure is designed to comply with World Trade Organisation (WTO) rules and other international obligations of the European Union (EU).

The CBAM is seen as an alternative to the measures that address the risk of carbon leakage in the EU's Emissions Trading System (EU ETS), and it is meant to avoid that the emissions reduction effort of the EU are offset by increasing emissions outside of the EU through relocation of production or increased imports of less carbon-intensive products.

The draft law was unveiled by the European Commission on 14 July 2021, as part of the so-called Fit for 55 legislative package. The Council of the European Union adopted its general approach on 15 March 2022. The European Parliament's relevant committee adopted a preliminary position on 17 May.

• Primary Source

Commentary and Analysis

Wikipedia: Carbon Border Adjustment Mechanism https://en.wikipedia.org/wiki/Carbon_Border_Adjustment_Mechanism

PwC (Netherlands): Services: Carbon Border Adjustment Mechanism https://www.pwc.nl/en/services/tax/managing-tax-and-energy-transition/fit-for-55/carbon-border-adjustment-mechanism.html

European Environmental Bureau (EEB): Towards a Carbon Border Adjustment in Europe – EEB response to public consultation (28 October 2020) https://eeb.org/library/towards-a-carbon-border-adjustment-in-europe-eeb-response-to-public-consultation/

LSE: Grantham Institute: Policy Publications, 01/04/2021: What does an EU Carbon Border Adjustment Mechanism mean for the UK? https://www.lse.ac.uk/granthaminstitute/publication/what-does-an-eu-carbon-border-adjustment-mechanism-mean-for-the-uk/

Centre for European Reform (CER): Insights, 05/07/2021: Avoiding the pitfalls of an EU Carbon Border Adjustment Mechanism https://www.cer.eu/insights/avoiding-pitfalls-eu-carbon-border-adjustment-mechanism

White&Case: Alert, 15/07/2021: Fit for 55: EU moves to introduce carbon border adjustment mechanism https://www.whitecase.com/publications/alert/fit-55-eu-moves-introduce-carbon-border-adjustment-mechanism

Bruegel: Blog, 19/07/2021: The European Union’s carbon border mechanism and the WTO https://www.bruegel.org/2021/07/the-european-unions-carbon-border-mechanism-and-the-wto/

Pinsent Masons: Out-Law News, 19/07/2021: European Commission outlines plan for carbon border adjustment mechanism https://www.pinsentmasons.com/out-law/news/european-commission-outlines-plan-for-carbon-border-adjustment-mechanism

FreshFields Bruckhaus Deringer: Briefings, 22/07/2021: CBAM: Europe’s attempt to prevent carbon leakage https://www.freshfields.com/en-gb/our-thinking/knowledge/briefing/2021/07/cbam-europes-attempt-to-prevent-carbon-leakage/

Veblen Institute: Publications, 23/07/2021: The conditions for an effective and fair carbon border adjustment mechanism https://www.veblen-institute.org/The-conditions-for-an-effective-and-fair-carbon-border-adjustment-mechanism.html

International Institute for Sustainable Development (IISD): Commentary, 28/07/2021: EU Unveils Planned Carbon Tax on Imports Amid U.S., Japanese Concerns https://sdg.iisd.org/commentary/policy-briefs/eu-unveils-planned-carbon-tax-on-imports-amid-u-s-japanese-concerns/

Ernst&Young (EY): Tax Alerts, 29/07/2021: European Commission releases proposal for a Carbon Border Adjustment Mechanism https://www.ey.com/en_gl/tax-alerts/european-commission-releases-proposal-for-a-carbon-border-adjustment-mechanism

Deutsche Welle, 03/08/2021: EU's new carbon scheme — how will it affect trade with ASEAN? https://p.dw.com/p/3yTC6

UK in a Changing Europe: Commentary, 03/08/2021: CBAM: what might an EU Carbon-Border Adjustment Mechanism mean for the UK? https://ukandeu.ac.uk/eu-cbam-uk/

The Economist, 07/08/2021: The EU’s proposed carbon tariff gets a mixed reaction from industry https://www.economist.com/business/2021/08/07/the-eus-proposed-carbon-tariff-gets-a-mixed-reaction-from-industry

GMFUS: Policy Briefs, 03/09/2021: The EU’s Triangular Dilemma on Climate and Trade https://www.gmfus.org/news/eus-triangular-dilemma-climate-and-trade

Heinrich Böll Foundation: Analysis, 13/09/2021: The proposal for a Carbon Border Adjustment Mechanism fails the ambition and equity tests https://eu.boell.org/en/2021/09/13/proposal-carbon-border-adjustment-mechanism-fails-ambition-and-equity-tests

Oxford University: Practical Ethics, 14/09/2021: The Morality of Carbon Border Taxes https://blog.practicalethics.ox.ac.uk/2021/09/the-morality-of-carbon-border-taxes/

Foreign Policy, 17/09/2021: China and the United States Could Sabotage EU Emission Efforts Again https://foreignpolicy.com/2021/09/17/china-united-states-european-union-greenhouse-gas-emissions/

EIAS: Op-Ed, 21/09/2021: Mitigating Opposition to the Carbon Border Adjustment Mechanism: Engaging BRICS and the Global South https://eias.org/op-ed/mitigating-opposition-to-the-carbon-border-adjustment-mechanism-engaging-brics-and-the-global-south/

Cambridge University: Cambridge Institute for Sustainability Leadership: Working Paper, October 2021: On the Borderline: The EU CBAM and its place in the world of trade https://www.cisl.cam.ac.uk/resources/publications/eu-cbam-and-its-place-world-trade

Plastics Europe: Knowledge Hub, October 2021: Position Paper - Carbon Border Adjustment Mechanism (CBAM) https://plasticseurope.org/knowledge-hub/carbon-border-adjustment-mechanism-cbam/

Italian Institute for International Political Studies (ISPI): Commentary, 05/10/2021: The Carbon Border Adjustment Mechanism: A Call for Cooperation on Carbon Pricing https://www.ispionline.it/en/pubblicazione/carbon-border-adjustment-mechanism-call-cooperation-carbon-pricing-32211

European Aluminium: Preliminary Assessment - Draft Regulation on the introduction of an EU Carbon Border Adjustment Mechanism (7 October 2021) https://www.european-aluminium.eu/media/3299/07-10-2021-european-aluminium_preliminary-views-on-draft-cbam-proposal-final.pdf

European Tax: Blog, 12/10/2021: Graphite or Diamonds? The complications of Carbon Border Adjustment Mechanism(s) https://www.europeantax.blog/post/102h7t4/graphite-or-diamonds-the-complications-of-carbon-border-adjustment-mechanisms

Open Society Foundations: Voices, 21/10/2021: The EU Must Think Globally on Carbon Import Tax https://www.opensocietyfoundations.org/voices/the-eu-must-think-globally-on-carbon-import-tax

Peterson Institute for International Economics (PIIE): Policy Briefs, November 2021: Can EU carbon border adjustment measures propel WTO climate talks? https://www.piie.com/publications/policy-briefs/can-eu-carbon-border-adjustment-measures-propel-wto-climate-talks

European Centre for International Political Economy (ECIPE): Policy Briefs, November 2021: Europe’s Carbon Border Adjustment Mechanism: Time to Go Back to the Drawing Board https://ecipe.org/publications/europe-carbon-border-adjustment-mechanism/

Harvard International Review, 17/11/2021: The European Union, the Carbon Border Adjustment Mechanism, and Global Climate Leadership https://hir.harvard.edu/the-european-union-the-carbon-border-adjustment-mechanism-and-global-climate-leadership/

Institute for European Environmental Policy (IEEP): Publications, 18/11/2021: Climate ambition and justice: A compass for the CBAM design https://ieep.eu/publications/climate-ambition-and-justice-a-compass-for-the-cbam-design

E3G: Letters, 13/12/2021: EU’s Carbon Border Adjustment Mechanism — Joint NGO statement https://www.e3g.org/news/eu-carbon-border-adjustment-mechanism-cbam-joint-ngo-statement/

EPRS: Briefing, January 2022: ‘Fit for 55’ package: Carbon border adjustment mechanism - Initial Appraisal of a European Commission Impact Assessment https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)699473

Institute of International & European Affairs: Blog, 20/01/2022: CBAM: An EU Foreign Climate Policy https://www.iiea.com/blog/cbam-an-eu-foreign-climate-policy

CEPR: VoxEU: Article, 23/01/2022: Japan should lead the global effort to decarbonise: Reflections on the EU’s Carbon Border Adjustment Mechanism https://voxeu.org/article/reflections-eu-s-carbon-border-adjustment-mechanism

SP Global: Market Insights, 09/02/2022: CBAM may not work without policy adopted for steel exporters: webinar https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/metals/020922-cbam-may-not-work-without-policy-adopted-for-steel-exporters-webinar

Stockholm Environment Institute (SEI): Discussion Briefs, 10/02/2022: Swedish policy positions and perspectives on CBAM https://doi.org/10.51414/sei2022.004

Carbon Market Watch: Opinion, 24/02/2022: CBAM: Exploring MEP Chahim’s draft report https://carbonmarketwatch.org/2022/02/24/cbam-exploring-mep-chahims-draft-report/

Ernst&Young (EY): Article, 04/03/2022: Carbon Border Adjustment Mechanism (CBAM) update and its impact on the EU cross-border imports https://www.ey.com/en_ch/tax/green-taxes/carbon-border-adjustment-mechanism

Institute for European Environmental Policy (IEEP): Publications, 07/03/2022: Summary for decision-makers: Four guiding principles for CBAM design and implementation https://ieep.eu/publications/summary-for-decision-makers-four-guiding-principles-for-cbam-design-and-implementation

French Institute of International Relations (IFRI): Brefings, 09/03/2022: The EU’s Carbon Border Adjustment Mechanism: A Piece in the Industry Decarbonization Puzzle https://www.ifri.org/en/publications/briefings-de-lifri/eus-carbon-border-adjustment-mechanism-piece-industry

European Environmental Bureau (EEB): Joint NGO statement on the Carbon Border Adjustment Mechanism (CBAM) ahead of the ECOFIN Meeting (10 March 2022) https://eeb.org/wp-content/uploads/2022/03/NGO-statement-on-CBAM-for-ECOFIN-meeting_March-2022.pdf

Tax Foundation, 18/03/2022: Russia’s Ukrainian War Could Impact EU Carbon Proposal Too https://taxfoundation.org/eu-carbon-border-adjustment-mechanism-cbam/

Heinrich Böll Foundation (Tel Aviv): Explainer, 21/03/2022: What is the EU’s Carbon Border Adjustment Mechanism and what does it mean for Israel? https://il.boell.org/en/2022/03/21/what-eus-carbon-border-adjustment-mechanism-cbam

Centre for Economic Policy Research (CEPR): VoxEU, 26/03/2022: The EU in search of a WTO-compatible Carbon Border Adjustment Mechanism https://voxeu.org/article/search-wto-compatible-carbon-border-adjustment-mechanism

EurActiv: Opinion, 31/03/2022: United States lawmakers are at a CBAM tipping point https://www.euractiv.com/section/energy-environment/opinion/united-states-lawmakers-are-at-a-cbam-tipping-point/

SP Global: Commodity Insights, 28/04/2022: EU carbon border charge threatens exports: AEGIS Europe https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-transition/042822-eu-carbon-border-charge-threatens-exports-aegis-europe

Centre for Strategic & International Studies (CSIS): Analysis, 17/05/2022: The CBAM, Sectoral Averages, and the Need for Granularity https://www.csis.org/analysis/cbam-sectoral-averages-and-need-granularity

Clingendael: Alert, 24/05/2022: The CBAM effect: the world's response to the EU's climate stick https://www.clingendael.org/publication/cbam-effect-worlds-response-eus-climate-stick

EPRS: Briefing, May 2022: EU carbon border adjustment mechanism: Implications for climate and competitiveness https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)698889

EPRS: At a Glance, June 2022: EU carbon border adjustment mechanism https://www.europarl.europa.eu/thinktank/en/document/EPRS_ATA(2022)729462

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News

EUObserver, 16/07/2021: EU carbon border tax to target imports from 2026 https://euobserver.com/climate/152460

TIME Magazine, 26/07/2021: John Kerry on Border Carbon Tax: The U.S. Doesn't Want to Push Others Away https://time.com/6084078/john-kerry-border-carbon-mechansim-cbam/

Reuters, 01/09/2021: EU's planned carbon border tax to impact Russia the most - study https://www.reuters.com/business/environment/eus-planned-carbon-border-tax-impact-russia-most-study-2021-09-01/

The Guardian, 28/10/2021: EU carbon border levy could sabotage climate goals, says thinktank https://www.theguardian.com/environment/2021/oct/28/eu-carbon-border-levy-could-sabotage-climate-goals-says-thinktank

Argus Media, 08/12/2021: Doubts persist on suitability of EU CBAM https://www.argusmedia.com/en/news/2281231-doubts-persist-on-suitability-of-eu-cbam

Politico, 23/12/2021: London mulls carbon border tax with an eye on Brussels https://www.politico.eu/article/carbon-border-tax-carbon-pricing-steve-barclay-carbon-leakage-cbam/

EurActiv, 11/01/2022: Lawmaker drafts ‘complete overhaul’ of EU carbon border levy https://www.euractiv.com/section/energy-environment/news/eu-lawmaker-drafts-complete-overhaul-of-carbon-border-levy/

RFI News, 20/01/2022: EU ministers mull climate policy, carbon border tax https://www.rfi.fr/en/eu-ministers-mull-climate-policy-carbon-border-tax

EurActiv, 15/02/2022: EU in balancing act over carbon border levy, industry concerns https://www.euractiv.com/section/energy-environment/news/eu-in-balancing-act-over-carbon-border-levy-industry-concerns/

EUObserver, 17/05/2022: MEPs raise ambition on EU carbon market reform https://euobserver.com/green-economy/154969

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Official

EUR-LEX: SWD(2021)643: Staff Working Document accompanying the Proposal - Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:643:FIN

EUR-LEX: SWD(2021)644: Staff Working Document accompanying the Proposal - Executive Summary of the Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:644:FIN

EUR-LEX: SWD(2021)647: Staff Working Document accompanying the Proposal - Subsidiarity Grid https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:647:FIN

European Parliament: Legislative Observatory: Procedure File for Proposal on Carbon Border Adjustment Mechanism. 'Fit for 55 package' (2021/0214(COD)) https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2021/0214(COD)

European Parliament: Legislative Train Schedule: Carbon Border Adjustment Mechanism as part of the European Green Deal https://www.europarl.europa.eu/legislative-train/theme-a-european-green-deal/file-carbon-border-adjustment-mechanism

European Commission: DG Taxation and Customs Union: Green Taxation: Carbon Border Adjustment Mechanism https://ec.europa.eu/taxation_customs/green-taxation-0/carbon-border-adjustment-mechanism_en

European Commission: Better Regulation: Have Your Say: EU Green Deal (carbon border adjustment mechanism) https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12228-EU-Green-Deal-carbon-border-adjustment-mechanism-_en

Norwegian Government: Letter, 02/07/2021: Carbon Border Adjustment Mechanism – Preliminary Norwegian Positions https://www.regjeringen.no/en/find-document/dep/FIN/anbud-konsesjoner-og-brev/Publications-in-English-or-translated-in/utvalgte-brev/2021/carbon-border-adjustment-mechanism-preliminary-norwegian-positions/id2865475/

European Commission: Press Release, 14/07/2021: European Green Deal: Commission proposes transformation of EU economy and society to meet climate ambitions https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3541

European Commission: Carbon Border Adjustment Mechanism: Questions and Answers (14 July 2021) https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_3661

EPP EP Group: Newsroom, 21/12/2021: De-carbonise, not de-industrialise Europe https://www.eppgroup.eu/newsroom/news/de-carbonise-not-de-industrialise-europe

Norwegian Government: Letter, 02/03/2022: Carbon Border Adjustment Mechanism – Norwegian Positions https://www.regjeringen.no/en/find-document/dep/FIN/anbud-konsesjoner-og-brev/Publications-in-English-or-translated-in/utvalgte-brev/2022/carbon-border-adjustment-mechanism-norwegian-positions/id2902803/

Council of the European Union: Press Release, 15/03/2022: Council agrees on the Carbon Border Adjustment Mechanism (CBAM) https://www.consilium.europa.eu/en/press/press-releases/2022/03/15/carbon-border-adjustment-mechanism-cbam-council-agrees-its-negotiating-mandate/

European Parliament: Press Release, 17/05/2022: CBAM: MEPs push for higher ambition in new carbon leakage instrument https://www.europarl.europa.eu/news/en/press-room/20220516IPR29647/

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