IOGP written input to the public consultation on the Carbon Border Adjustment Mechanism (CBAM)

November 2020

This document provides IOGP’s written input to the Commission’s public consultation on the Carbon
Border Adjustment Mechanism (CBAM)

The EU emission trading system (ETS) is a primary policy tool in the EU’s approach to tackling climate change. One element of the current EU ETS is a carbon leakage mechanism under which free allowances are issued to operators in sectors being exposed to international competition. IOGP understands that CBAM can be an alternative or complementary to this existing mechanism.

Key Points

  • IOGP favours a globally consistent, meaningful carbon price. However, until consistency on a global carbon pricing and ambition can be achieved, IOGP believes it is essential to adopt effective EU measures that avoid carbon leakage
  • A level playing field for all companies both on EU and international markets should be guaranteed to stimulate emissions reduction globally. A comprehensive set of measures needs to consider both imports and exports while avoiding any double-compensation or double taxation
  • The following aspects need to be considered while designing a CBAM:
    • Evaluation of carbon content
    • Administrative burden
    • Reflection of the ETS price
    • The use of revenues
    • The international dimension of CBAM & compatibility with WTO rules
  • CBAM alone is not a silver bullet to achieve the ambitious EU energy and climate goals. Other policy tools to mitigate carbon leakage risks and incentivise low-carbon investments will be required to deliver a sustainable future

Overview

  • Introduction
  • Effective carbon leakage measure is needed
  • Aspects to be considered when designing a CBAM
  • Selected pros & cons of the proposed Commission’s design options
  • A phased-in approach to ensure a successful implementation of CBAM
  • A thorough impact assessment is needed to establish an effective carbon leakage mechanism like CBAM
  • Final remarks

Author

IOGP

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