The European Union (E.U.) has called on its international partners to impose a price on pollution, a move that could help them avoid a new carbon import levy proposed by the European Commission (E.C.).
The E.C. in June aims to propose a measure that would penalize emissions embedded in some products imported into the E.U., in sectors that could include fertilizers, steel, cement, and power, according to a Bloomberg report, citing E.U. Economic Affairs Commissioner Paolo Gentiloni on March 23 during a conference hosted by the French government.
The so-called Carbon Border Adjustment Mechanism (CBAM) is part of the E.C.’s “Green Deal,” which targets Europe to reach climate-neutrality by 2050. The E.C. has repeatedly stated that the CBAM would be “an alternative” to the region’s existing carbon leakage measures.
While there have been positive climate signals in some countries over the past several months, there is the need to build on such a global trend to set up joint approaches with like-minded international partners, including introducing equivalent carbon pricing mechanisms, Gentiloni said, according to the report.
The new import levy would help avoid carbon leakage where producers move to regions with more lenient pollution regulations.
The risk of companies relocating their production outside Europe is set to grow amid increasing emission prices in the region, which have surged by 60 percent since November; on Feb. 12 they hit a record high of nearly €40 ($49) per mt of carbon-dioxide equivalent.
The E.C. is looking at various design options for the CBAM, but there is “some convergence” towards a tool that would operate like a mirror image of the E.U. Emissions Trading System (ETS), according to the report, citing Gentiloni. Under such a “notional ETS,” importers of emissions-intensive products would have to pay a charge linked to the price of allowances in Europe, home to the world’s largest emissions-trading system.
However, it is not proposed that importers will be subject to an adjustment that is higher than that which applies to domestic E.U. producers, according to the commissioner. The E.C. is also looking at possible ways to support less developed countries.