European Union – Carbon Border Adjustment Mechanism

The EU is committed to addressing global challenges like climate change. On 16 September 2020, European Commission President Ursula von der Leyen announced a legislative proposal on a carbon border adjustment mechanism (CBAM) for selected sectors, scheduled for 2021.

In its 2021 Work Programme, the Commission plans to table proposals for a CBAM in the second quarter of 2021. The European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) prepared an own-initiative report entitled ‘Towards a WTO-compatible EU carbon border adjustment mechanism’. The Committees on International Trade (INTA) and on Economic and Monetary Affairs (ECON) were associated committees under Rule 57 of Parliament’s Rules of Procedure. On 7 October 2020, the draft report was published. This was adopted by ENVI on 5 February 2021, the report called for the introduction of a CBAM as part of a broader EU industrial strategy, with a view to reducing the risk of carbon leakage. In addition, it analysed aspects relating to the design and scope of a CBAM, and its possible contribution to the financing of the EU budget. On 10 March 2021, Parliament adopted the resolution on a WTO-compatible CBAM with 444 votes for, 70 against and 181 abstentions.

There is along way before this ambition becomes reality, and there is a growing internal opposition to this.  At this stage it seems food and agriculture is set to be excluded, at least in the initial stages. It is also difficult to envisage a WTO compliant scheme. We have also raised this in the context of the EU-Australia and UK-Australia Free Trade Agreement negotiations.

For further information on International policy, trade or market access, please contact Damien Griffante at or 0423 094 943.

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