EU Set to Offer Shields for Exporters Under Carbon Border Levy
(Bloomberg) -- The European Union is planning a measure to shield its exporters from disproportionate financial burdens when the bloc’s landmark carbon border levy kicks in next year.
The European Commission, the bloc’s executive, will say on Wednesday that it wants to use the revenues generated by the Carbon Border Adjustment Mechanism to support production at risk of being relocated to third countries with laxer environmental rules, according to a draft document seen by Bloomberg News.
The bloc is rolling out its CBAM initiative, which will start slapping fees on carbon-intensive imports as of next year in an effort to stop EU companies fleeing strict climate rules. But CBAM will also gradually phase out free carbon allowances for EU emitters, which has sparked complaints that it will make their exports more expensive. The planned proposal would allow affected companies to get compensation for the gradual loss of free emission permits.
“Various CBAM sectors have called for urgent action to address export carbon leakage,” the commission said in the document to be published on Wednesday. “While CBAM addresses the risk of carbon leakage for the production of CBAM goods for the EU, the risk of carbon leakage for the production of CBAM goods for export markets might increase with the phase-out of free allocation, as long as certain third countries do not introduce equivalent carbon pricing.”
The commission wants to ensure equal treatment for CBAM goods whether produced and sold in the bloc, exported to third countries or imported into the EU to maintain compatibility with the World Trade Organization rules.
“The scope will need to be established based on objective criteria,” according to the document. “This scheme would be in place for an initially defined period with a built-in review mechanism. The proposal would be put forward by the end of 2025, together with the proposal extending CBAM to downstream goods and introducing anti-circumvention measures.”
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