Revived US climate ambitions join worldwide efforts to reduce emissions
It’s being considered how to manage the risks of a lack of climate ambition in third countries, when the European Union’s has targeted to achieve a climate-neutral economy by 2050 and to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels. One of the most serious risks is the leakage of CO2 and investment if there is a relocation of production or investment to third countries with less stringent environmental requirements. Here the importance of the Border Carbon Correction Mechanism (CBCM) arouses. A mechanism should help reduce the risk of carbon leakage, encourage third countries to strengthen CO2 commitments and create a more level playing field.
“We are convinced that, given the EU’s climate neutrality commitments and the lack of similar commitments on the global stage, CBCM should help address carbon leakage, maintain the competitiveness of EU industry and foster climate ambitions in third countries by ensuring a level playing field for our businesses. For the time being, we can only predict how this will be accepted in the world, especially in the context of World Trade Organization (WTO) rules. At the international level, while some trading partners are extremely critical of its prospects in advance, there are already glimmers, especially with regard to US President Joe Biden’s plans to revive climate ambitions. A similar CBCM mechanism is being considered by Canada. Discussions are also beginning in the UK, which has left the EU. If these efforts were finally combined, one could expect an even greater impact on the global reduction of emissions and equalization of competition conditions,” says Vidmantas Janulevičius, President of LPK.
In June this year the European Commission will publish a proposal for a carbon tax on imports of certain goods from third countries. The tax will be equal to the price of CO2 paid by EU producers under the Emissions Trading Scheme (ETS). As early as March, the European Parliament’s plenary session will vote on the report by the Committee on the Environment, Public Health and Food Safety “Towards a WTO-compliant EU carbon border adjustment mechanism”.The latter will express strong support for the creation of this instrument.
LPK sent its position to the European Commission and members of the European Parliament elected in Lithuania. The position was prepared after extensive consultations with Lithuanian sectoral associations and companies and presented in a public consultation conducted by the European Commission.
The position emphasizes the need for the European Commission to consider and propose the most effective option for this mechanism. The LPK advocates compliance with the EU Emissions Trading Scheme (ETS). ETS is and should remain the main regulatory tool for European industry and energy sectors to reduce greenhouse gas emissions. It is important that this system preserves the Lithuanian and EU industries which are the riskiest of CO2 leakage.
The new mechanism should directly reflect the price of CO2 paid by EU producers participating in the scheme. The adjustment could be based on the difference between the maximum emission level of the product set in the ETS and the level of CO2 emissions of the imported product. To avoid risky dispute procedures and improve regulatory predictability, it is important to comply fully with current WTO rules. Moreover, it would also reduce the risk of retaliation by major trading partners from third countries. Appropriate anti-circumvention safeguards are also needed.
As for the funds that would be raised through this mechanism, the LPK considers that they should be used to cover decarbonisation investments and business costs for the development of low-carbon technologies, innovation and research related to greening the economy within the EU.
