Suchergebnisse

The European Commission's (EC) proposed Carbon Border Adjustment Mechanism (CBAM) is meant to mirror the carbon price of the EU Emissions Trading System (EU ETS) for several imported goods. While the CBAM can rely on certain aspects of the EU ETS regarding its costs and compliance obligations, it also requires its own procedures and administrative structure. The EC's proposal outlines a decentralised approach that largely relies on authorities in Member States for essential functions and enforcement, with oversight and coordination at the European level. This report details the EC's proposed administrative structure as well as its implications for Member States and key challenges going forward. The main challenge for the implementation of CBAM is the distribution of responsibilities between importers, third-country installations, verifiers, and authorities to ensure effectiveness of the instrument and a reliable monitoring, reporting and verification system. It is further crucial to find an appropriate balance between centralised and decentralised administrative structures, using existing capacities and providing harmonised and efficient procedures. The timeline for implementation needs to allow for the drafting of clear and robust implementing acts as well as sufficient time for involved firms and authorities to implement CBAM.

This discussion paper analyses potential synergies between climate clubs and CBAMs. It presents a case study of the concrete proposals currently debated for implementation: 1) the EU CBAM which looks set to be adopted by the EU Council and Parliament later this year and 2) the proposal for a climate club that was adopted by the G7 at their summit in June 2022. Chapter 2 introduces the two instruments and explains how they interrelate. Chapter 3 discusses potential obstacles to a full integration of both instruments. Chapter 4 shows how product-specific standards can be a tool at the intersection of both instruments, thereby augmenting synergies between them. The paper is directed at policy makers as well as the general scientific community that conducts research on the topics described above.

In October 2023, the EU introduced a Carbon Border Adjustment Mechanism (CBAM) imposing a carbon price on imports of selected goods to the EU market. One question that arises for the implementation of the new instrument is how third-country carbon prices can be recognised and deducted from CBAM payments. The discussion paper presents two possible approaches: One that recognises carbon costs that are actually incurred, and another that uses carbon price averages of the country of origin. The first, the actual payment approach, simplifies the questions of how to account for free allocation of allowances or tax rebates, and how to deal with subnational systems. It puts the responsibility of providing evidence on the CBAM declarants who have an interest in achieving the recognition of their carbon costs incurred under a third-country instrument, while the other approach, the average price approach, assigns more responsibilities to the EU. The discussion paper raises conceptual considerations and open questions regarding the technicalities of recognising third-country carbon prices, such as the treatment of multi-product installations or upstream carbon pricing instruments. It discusses challenges that are specific to the processes of cap-and-trade systems, tradable performance standards, and carbon taxes. A final recommendation on the design of the system for recognising third-country carbon pricing under the CBAM will not be developed as part of the paper. Instead, the paper aims to lay the general foundations for the process to establish binding EU rules, which is due to start in 2024 and to be finalised by the end of 2025 at the latest. The complexity of the issue, as analysed in this paper, implies that the EU will need a fair amount of pragmatism in designing the recognition procedure, keeping the regulatory burden manageable while at the same time effectively preventing carbon leakage. In the medium term, close cooperation with trade partners and pragmatic solutions to accommodate specific features of third-country systems could support a smooth implementation of the EU CBAM.