The European Commission said today that it intends to present plans by the end of the year to reduce the risk of carbon leakage for goods exported from the EU in sectors covered by the bloc's carbon border adjustment mechanism (CBAM).
The proposal will be designed to provide equal treatment for all goods, "whether produced and sold in the EU, imported into the EU or exported", the commission said. The measure would be set up for a "defined period" and then reviewed in light of the planned 2026 revision of the EU emissions trading system (ETS). No further details were provided.
Industries have long raised concerns about risks to competitiveness for products in CBAM sectors exported from the EU, given that they must still pay carbon costs while the mechanism only applies an effective carbon price on goods imported into the bloc.
German industry federation BDI warned earlier this year that CBAM provides "no answer" to the problem of exports, while European cement and steel associations have called for export provisions under the mechanism.
But there are concerns that introducing export protection measures could put CBAM at odds with World Trade Organisation (WTO) rules. Russia has already raised a CBAM dispute at the WTO, contending that the calculation of existing free ETS allocations for industry — which includes the value of exports — counts as an "alleged export subsidy" in contravention of the General Agreement on Tariffs and Trade 1994, the Agreement on Import Licensing Procedures, and the Agreement on Subsidies and Countervailing Measures.
While deeming the measure an "important step", non-governmental organisation Bellona Europa today criticised the lack of information in the commission's initial proposal, which it said "was not presented with sufficient detail and does not provide a clear pathway for a long-term solution to the risk of carbon leakage from exports".
"If rebates are the chosen path, they must be conditional on effective and serious decarbonisation commitments," Bellona said.
The commission launched a separate consultation this week on whether to extend CBAM's scope to some downstream products to limit carbon leakage from the measure. It is seeking views on whether CBAM causes carbon leakage downstream, and whether extending its scope could reduce this risk or incentivise the take-up of low-carbon EU goods.
It also asks respondents whether such an extension would increase costs for EU manufacturers or consumers, the extent of the administrative burden it would entail for EU importers, or non-EU producers and exporters, as well as the potential costs of related reporting requirements.
The consultation also seeks views on whether CBAM in its current form poses circumvention risks, including via widely varying embedded emissions under the same goods categories, or resource shuffling, where companies choose to export their cleanest products to the EU without reducing their overall emissions. The consultation closes on 26 August.
