Ares(2020)3900681 - 24/07/2020
Ref. Ares(2020)5071176 - 28/09/2020
14 July 2020, 17h30-18h00
Carbon Border Adjustment Mechanism
The European Green Deal proposes the introduction of a carbon border adjustment
mechanism for selected sectors by 2021, if differences in levels of ambition worldwide
persist as the EU increases its climate ambition. The nature of the measure has to be
assessed carefully in particular in terms of economic efficiency and legal feasibility, the
latter most notably with respect to the EU’s international commitments, including World
Trade Organisation rules. It would be an alternative to the measures that address the risk
of carbon leakage in the EU’s Emissions Trading System.
A part of the work will relate to the selection of sectors subject to the border adjustment
measure. France has taken a position in favour of a carbon border adjustment on the steel
and cement sectors. Spain and probably some Baltic countries would support a carbon
border adjustment on electricity production.
On 4 March, the Commission published an inception impact assessment on its ‘Better
regulation – have your say’ portal. It received 219 contributions from diverse stakeholders
The Commission will conduct a full-fledged impact assessment of a carbon border-
adjustment mechanism in 2020. A public consultation, expected to be launched still in
July, will provide evidence for designing the options and assessing the impacts.
Position of ArcelorMittal
Executives of ArcelorMittal have been in contact with the Commission, both at political
and at service level during both the current and the previous mandate to express their
support for a carbon border adjustment mechanism (CBAM).
In response to the consultation on the inception impact assessment launched by the
Commission in March, ArcelorMittal argues that the development of an effective
mechanism is essential as a basis for the transition to climate neutrality of steel production
in Europe and a crucial cornerstone of European Green Deal success.
In line with the views of the European Steel Association (EUROFER), ArcelorMittal has
emphasised that avoiding the risk of carbon leakage is a pre-condition for preserving both
the environmental integrity of EU climate policy and industrial competitiveness. While free
allocation in the EU Emissions Trading System (ETS) is designed mainly to address the
risk of production relocation, a carbon border adjustment measure can be an effective
instrument to address structurally the emissions embedded in imports.
Through EUROFER, ArcelorMittal has further argued that a carbon border adjustment
mechanism should be carefully designed and implemented initially as a
complementary provision, in addition to the existing measures addressing carbon
leakage (free allocation of allowances and compensation for indirect costs due to the
increase in electricity prices). The measure should take into account both direct and
indirect costs of the EU ETS and should apply initially only to selected sectors. In the case
of steel, the measure could initially apply only to steel finished and semi-finished products
(e.g. coils, slabs, plates, bars, billets) and then be extended to steel input materials.
The EU’s objective is to become climate neutral by 2050. As long as our international
partners do not share the same ambition as the EU, there is a risk of carbon leakage,
either because production is transferred from the EU to other countries with lower
ambition for emission reduction, or because EU products are replaced by more carbon-
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14 July 2020, 17h30-18h00
The primary purpose of a Carbon Border Adjustment Mechanism is to allow carrying
out ambitious climate policies, while preventing carbon leakage. The Carbon Border
Adjustment Mechanism is an alternative instrument
to the free allocation in the
Emissions Trading System.
Reducing greenhouse gas emissions requires effort and investments. In case our
partners around the world do not engage in policies as ambitious as those of the EU,
as the EU increases its climate ambition, a carbon border adjustment would ensure
that the price of imports reflect more accurately their carbon content.
We will make a proposal for a Carbon Border Adjustment Mechanism in 2021.
carbon border tax on imports is one option. Other options exist such as the inclusion of
importers in the EU Emissions Trading System.
We will assess the economic, environmental and social impact of possible measures.
These measures must also be compatible with our international commitments, in
particular the rules of the World Trade Organization and our trade agreements.
We intend to engage actively with stakeholders and third countries
introducing the measure. An online public consultation will be launched soon.
Such measures could first be put in place for selected sectors
. They will be an
alternative to existing measures
aiming to address the risk of carbon leakage.
Both the revenues from auctioning under the EU Emissions Trading System and the
Carbon Border Adjustment Mechanism have been mentioned in the Next Generation
EU package as possible own resources
for the EU budget.
Will you continue to allocate free allowances?
The text of the Green Deal is clear in that respect
, asking us to develop a
mechanism “alternative to the measures that address the risk of carbon leakage in the
EU’s Emissions Trading System”.
We are currently assessing the possible impacts of increasing the 2030 greenhouse
gas emission reduction target, including impacts on the EU Emissions Trading System
and on the risk of carbon leakage.
The Carbon Border Adjustment Mechanism should be an alternative
measures to counter the risk of carbon leakage, namely the free allowances provided
under the EU ETS.
It is, of course, in our interest to identify a system that will support our industries
without penalising those who have been already investing
to develop cleaner and
better performing production processes and products.
Now that a Carbon Border Adjustment Mechanism is identified as a possible own
resource, is the “conditionality” clause to its development still relevant?
As long as differences in climate ambition levels around the world persist as the EU
increases its climate ambition, there is a risk of carbon leakage and therefore a risk that
climate action at EU level is undermined.
We continue to monitor progress and work with our partners, while we also continue to
prepare a Carbon Border Adjustment Mechanism proposal for adoptiond in 2021, as
How will you select sectors to which the Carbon Border Adjustment Mechanism
In our impact assessment, we will focus on sectors where there is a risk of carbon
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14 July 2020, 17h30-18h00
has obviously been part of these sectors.
We will pay attention to the feasibility
of the measure as well as its economic, social
and environmental impacts.
Inception impact assessment feedback
The large majority of the replies comes from the business sector. Trade federations,
business associations and individual businesses submitted approximately 150 replies. Of
these, about 60 contributions came from energy-intensive industries, mostly steel,
chemicals, cement, paper and glass and electricity production. The remaining replies were
submitted by approximately 20 NGOs and 20 citizens, while a few think-tanks,
academic/research institutions, trade unions and public authorities also sent their
comments. Most replies were from EU stakeholders with 24 coming from partners in third
countries. Overall, the majority of replies
(approximately 140) expressed support for
the Carbon Border Adjustment Mechanism
, with the remainder divided (roughly)
equally between limited support and no support.
The vast majority of responses expressed cautiousness in the design of the measure
requesting to consider all options possible. Among others, key areas emphasised included
impact on value chains
and reliance on imports of raw materials
, avoidance of
excessive effects on final consumers
, links to the EU Emissions Trading System
free allowances, distributional impact
in affected sectors and across countries,
especially developing economies and interaction with existing trade defence measures
on raw materials.
Positive replies further emphasised alternative incentives for low carbon production, while
some also proposed conditionality on increasing domestic carbon price and
abolition of free allowances.
Many also stressed that more would be needed to achieve
the 2050 climate neutrality goal, including large investments in new technologies
terms of design, some expressed support for Emissions Trading System extension to
, others for carbon customs duty
, if designed carefully, and some proposed
alternatives such as a tax on added emissions
As regards limited or no support replies, some of the main concerns highlighted by
The Carbon Border Adjustment Mechanism will negatively affect free trade
global supply chains;
It could result in import reduction
, which will not necessarily benefit the low carbon
producer in the export country;
Its effectiveness is questionable
as compared to the global pricing system and
public/private funding for Research and Development;
A Carbon Border Adjustment Mechanism could harm cross-border electricity
and thus deployment of renewable energy sources;
It does not protect the EU economy and is not in the interest of consumers
wider society; and
Existence of carbon leakage is questionable
and Emissions Trading System costs
are minor factors in firms’ decisions to move abroad.
Contacts – briefing coordination:
Electronically signed on 28/09/2020 13:43 (UTC+02) in accordance with article 11 of Commission Decision C(2020) 4482
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