The European Commission recently published a consultation on the possible adoption of a Carbon Border Adjustment Mechanism (CBAM). The consultation is open for public feedback until 28 October, 2020.
View the consultation published on the Commission’s website >> Click Here
The proposed mechanism is designed to ensure that the price of imports into the EU reflects more accurately their carbon content. The mechanism is proposed under the framework of the “European Green Deal”, the EU’s plan to reach net-zero greenhouse gas emissions in Europe by 2050. Thus the Commission proposes to implement the CBAM in order to prevent “carbon leakage”, situations in which product manufacturing processes in countries committed to significant reduction targets, like EU members, are transferred to countries with less ambitious reduction targets, which could lead to an increase in their total emissions.
As part of the mechanism, products imported into the EU will be taxed or charged in accordance with the carbon emissions emitted within the course of their production and shipping. Consequently the mechanism is expected to affect exporters from most industrial sectors and among others, exporters of chemicals, iron, paper and plastics – industry sectors in which carbon leakage risk is high and are therefore listed on the carbon leakage list.
The Commission intends to implement the proposed mechanism during the second quarter of 2021.
The Commission is currently examining several options of implementation for the mechanism and is consulting on the following questions, inter alia:
- Should the mechanism apply to all industry sectors or only to specific sectors, such as those with high carbon leakage risk;
- How should the mechanism be implemented – levied as a tax upon the product’s entry into the EU or incorporated into the existing EU Emissions Trading System;
- How should the carbon content of imported products be calculated and verified;
In view of the short timeframe for participation in the consultation process and the significance of the mechanism for Israeli manufacturers and exporters, we recommend examining the mechanism’s potential effects on your business activities and submitting feedback as soon as possible.