The European Commission is currently discussing a draft of a proposal for a Carbon Border Adjustment Mechanism (“CBAM”) Regulation that it is expected to present on July 14, 2021. A CBAM was already announced in the European Commission’s Communication for a Green Deal and is intended to protect the EU’s domestic industry that is at risk of carbon leakage—to create a level playing field—and to serve as a policy tool to encourage third countries to reduce their greenhouse gas (“GHG”) emissions.
The CBAM draft proposal is subject to intense negotiations among the different Directorates-General of the European Commission, and it is likely that it will be amended several times before the Commission finally presents it on July 14. Nevertheless, the draft already suggests that the CBAM proposal will require importers of covered goods into the EU to purchase and surrender a number of CBAM certificates that reflect the goods’ embedded emissions. In line with the European Parliament’s resolution, the CBAM would be linked to the EU Emissions Trading System (“EU ETS”) as the price of the CBAM certificates would reflect the average price of the ETS allowances.
Continue Reading Twelve Things to Know About the Upcoming EU Carbon Border Adjustment Mechanism