The Carbon Border Adjustment Mechanism: what implications for EU industrial competitiveness?

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Download the presentation "The effect of the COM CBAM proposal and ETS on EU manufacturing industry of finished goods" from Viktor Sundberg, Electrolux 

 

Keynote Speaker 

MEP Vlad-Marius Botos, European Parliament, Member of Renew Europe

Panelists' intervention 

Viktor Sundberg, Electrolux, Vice President Environmental & European Affairs

Steffen Engling, Business Europe, Industrial Affairs Department Adviser

Joseph M. McGuire, AHAM, President & CEO

Stéphane Arditi, EEB, Director Policy Integration & Circular Economy

 

The EU is at the forefront of international efforts to fight climate change. The Fit for 55 package, in the framework of the EU Green Deal, is part of the strategy to further seal the EU’s efforts as a global climate leader. As part of these measures, the Carbon Border Adjustment Mechanism is one of the most prominent proposals put forward to support the European Union’s commitment to reduce greenhouse gas emissions by at least 55% by 2030.

As Europe raises its climate ambitions, “the Carbon Border Adjustment Mechanism gives the opportunity to establish a level playing field for manufacturers around Europe,” kicked off MEP Vlad-Marius Botos, Member of Renew Europe, in a video intervention, underlining that in order to reach its ultimate goal, “an improved Mechanism needs to be negotiated, which reduces carbon leakage levels and lessens the burden on the end users of products,” he pointed. 

In the pursuit of the set environmental targets to reach zero-net emissions in the EU by 2050, tackling the growing concern of carbon leakage while preserving EU industrial competitiveness is of utmost importance. “Any CBAM should square the circle of competitiveness and climate effectiveness,” commented Mr Steffen Engling, Industrial Affairs Department Adviser at Business Europe. Preserving the Single Market as well as the innovation and competitiveness of all parts of the EU industry during its decarbonisation efforts is key in the context of safeguarding European jobs and a prosperous European economy. At the operational level, ”we believe that CBAM could exist as a complementary measure rather than an alternative to the free ETS allowances,” explained Mr Engling, outlining how such a combination would help provide a level playing field for EU manufacturers whilst still tackling the issue of decarbonisation. 

So what would be the main burdens stemming from the introduction of CBAM on EU companies? “In its current iteration, the CBAM proposal would improve the competitive outlook for the non-EU based manufacturing industry of finished goods,” stated Mr Viktor Sundberg, Vice President of Environmental & EU Affairs at Electrolux. The topic of indirect costs which do not apply to manufacturers outside of the European Union was then discussed. “Indirect costs on European manufacturers producing resources such as steel, could potentially lead to more carbon leakage being produced rather than the CBAM objective of reducing the levels of carbon leakage,” he explained. If the Mechanism is to be successfully implemented, the European Commission must carefully consider how costs on imported goods could provide a competitive edge over goods produced by the manufacturers in Europe and the subsequent impact on carbon leakage levels. 

Carbon pricing is an issue of great interest at an international level. Mimicking the EU’s CBAM, a proposal to introduce a U.S. polluter import fee has also been brought to the American Senate for discussion. “The U.S. is attentively watching the EU approach,” detailed Mr Joseph McGuire, President and CEO of The Association of Home Appliance Manufacturers (AHAM) , nevertheless “at this stage, any CBAM would be complicated to deal with domestically and globally, if it does not undertake a solid multilateral approach,” he continued. The CBAM proposal will possibly be a cornerstone of future carbon pricing legislation, keeping in mind that a global challenge needs to be addressed by a global solution. 

Accelerating the approach to decarbonisation in Europe will be integral to the eventual implementation of the CBAM proposal. With this in mind, “in its current state of art, the impact of CBAM would be extremely narrow on decarbonisation,” declared Mr Stéphane Arditi, Policy Integration & Circular Economy Director at The European Environmental Bureau (EEB). “More effort is needed to ensure it can effectively deliver on its promise, notably considering a systematic application of product footprinting,” he added. To mitigate the risks on the internal market, Mr Arditi concluded by proposing that “carbon footprinting could be utilised on products placed on the EU market to disincentive those the use of more carbon intensive products”. 

With a shared plea to make CBAM cost-effective for Europe and the wider world, Paolo Falcioni, APPLiA Director General, closed the roundtable and thanked the panelists for their contributions.

Watch the full recording of the event at this link.