EU’s Landmark Carbon Border Adjustment Mechanism Goes Into Effect

MOSCOW, October 1 (Sputnik) – The European Union on Sunday launched the first phase of its landmark Carbon Border Adjustment Mechanism (CBAM), which prescribes that foreign manufacturers provide the European Commission with information on harmful emissions.

The initiative is designed to eliminate inequality between EU manufacturers and foreign producers, as well as to encourage cleaner industrial production in non-EU countries.

In its transitional phase, the mechanism will apply to imports of goods from six carbon-intensive industrial sectors, including iron and steel, cement, fertilizers, aluminum, electricity generation and hydrogen. Starting from Sunday, foreign suppliers who plan to keep exporting to the EU have to collect data on their harmful air emissions and submit them to a special register.

At later stages, the CBAM will obligate foreign manufacturers to compensate for the difference in a price paid for carbon emissions of their products, which is caused by weaker environmental laws in their countries compared to stricter EU regulations. Under the new rules, foreign producers will have to pay for their emissions as if their plants were located on EU territory. The mechanism is also intended to prevent EU manufacturers from relocating their production facilities from the bloc to countries with lower environmental standards.

Opponents of the new mechanism argue that it will inevitably lead to an increase in world prices and, in general, will have a negative impact on both international trade and final consumers. Moreover, some experts believe that the EU countries will try to deal with the economic consequences of such a mechanism at the national level, softening their nations’ rules for its implementation.

The Council of the European Union in July adopted a new energy directive that aims to reduce EU member states’ final energy consumption by 11.7% by 2030 as part of the Fit for 55 package. The Fit for 55 package represents a set of proposals to revise and update EU legislation in order to reduce net greenhouse gas emissions by at least 55% by 2030 compared with 1990 and reach climate neutrality by 2050.