CEMBUREAU Position Paper on Carbon Border Mechanisms
In short, the European cement industry welcomes the idea of carbon border mechanisms as an opportunity to create a level-playing field on carbon and deliver deep CO2-emissions reduction. We however highlight a number of key design principles which should apply, namely:
· In the initial phase, a carbon border mechanism must be complementary to the EU ETS free allowances.
· It must be fully WTO-compatible.
· It must be based on verified emissions from importers to the EU, and include indirect emissions.
· It must be applicable to all ETS sectors alike.
· It should provide for a CO2 charge exemption for EU exporters
· CEMBUREAU, the European Cement Association, welcomes the idea of a carbon border mechanism as a key opportunity to enable the industry to help deliver the EU’s carbon neutrality objectives, and drive deeper CO2 emissions’ cut in the EU and beyond.
· The European cement industry already faces a strong risk of carbon leakage despite the partial free allocation provided under the EU Emission Trading Scheme (ETS). This risk is increasing at a very fast pace, as third countries which are not subject to the same CO2-constraints build up their export capacity to the EU.
· A carbon border mechanism could create the level playing field the industry needs to deliver low-carbon investments and move towards carbon neutrality along the value chain. It could also incentivise third countries to step up their efforts on climate change and ensure that the EU does not “outsource” its CO2 emissions through the import of more CO2-intensive products.
· However, carbon border mechanisms are by nature complex tools and it is essential to get their design right. A poorly-designed mechanism could indeed have significant consequences for the industry.
· In particular, it is imperative that any carbon border mechanism co-exists with free allocation under the EU ETS, at least until the end of Phase IV. The replacement of the existing carbon leakage measures by an untested mechanism would create considerable uncertainty and risks for investments in the EU, at a time the industry needs a predictable framework to deliver low-carbon investments.
· The core objective of a carbon border mechanism should be that producers outside the EU compete on the same CO2 cost basis as EU domestic producers. With this in mind, CEMBUREAU suggests some design principles which (1) are fair and transparent for both EU and non-EU producers, (2) will have a positive impact on climate worldwide, and (3) will avoid carbon leakage and imported CO2 emissions.