23 Jun 2022

CBAM Adopted by EU Parliament

Building on our CBAM series, we can now report that the CBAM was adopted by the EU Parliament (“Parliament”) on June 22, 2022.  The next step is the EU Council approval (“Council”)Even though there are still some differences regarding the approach between the Parliament and the Council, it is assumed that their shared vision of the overall goals will be decisive in finding a compromise on regulation introducing CBAM.

Back in 2005, the EU established the EU Emissions Trading System (“ETS), which has since become a cornerstone of the EU’s climate change policy and its most important tool for reducing greenhouse gasses (“GHG”) emissions.  However, the fight against climate change knows no borders.  That is why, in addition to the existing ETS, the EU is introducing a new Carbon Border Adjustment Mechanism (“CBAM”) which puts a levy on imported goods from countries where carbon prices are lower than those in the EU or non-existent.

In July last summer, under the leadership of President Ursula von der Leyen, the European Commission (“Commission”) presented an extensive package of eight proposals (“Fit for 55“) aimed at reducing GHGs emissions by 55 percent from 1990 and enhancing the EU’s reputation as a global climate leader. On March 12, 2022, the Council adopted a general approach to the CBAM regulation, which is very close to the EU Parliament’s view today.  For months, the Parliament has debated the speed with which the following steps should be taken and the scope of goods that CBAM should cover.  Diverse perspectives were temporarily aligned in the Report of the Parliament’s Committee on the Environment, Public Health and Food Safety, which was voted on today with specific changes at the Parliament’s plenary session.  The Members of the Parliament adopted their stance on three important EU draft laws, including CBAM, to combat climate change by reducing greenhouse gases by at least 55 percent by 2030 and to protect jobs and its citizens.

Today’s vote illustrates unambiguously that the EU is serious concerning environmental protection. According to the EU Parliament, the CBAM will gradually enter into force in 2027 and be fully implemented in 2032.

The EU Parliament is now ready to start negotiations with the Council and the Commission in a process known as a trialogue.  Even though there is some leeway for harmonization in the specific responses of the Parliament and the Council, it is assumed that their shared vision of the overall goals will be decisive in approaching a compromise on the final CBAM regulation.  It remains to be seen how long this process may take, but we promise to keep you updated on any developments.