Übung 2

Übung 2 handelt von CBAM

• CBAM increases the costs of imports from countries that do not tax emissions or apply lower rates.

• CBAM may lead to a further increase in the production costs of European firms that use intermediate goods from outside the EU.

• The CBAM and carbon tax together increase EU import prices by 1.3% on average.

• CBAM fully offsets any negative impact of a carbon tax on their competitiveness.

  
  

Die CBAM wird den Preis für Kohlenstoff zwischen einheimischen Produkten und Importen angleichen und sicherstellen, dass die Klimaziele der EU nicht durch Produktionsverlagerungen in Länder mit weniger ehrgeizigen Strategien untergraben werden. Indem sie sicherstellt, dass Importeure im Rahmen des EU-Emissionshandelssystems den gleichen Kohlenstoffpreis zahlen wie einheimische Hersteller, wird die CBAM die Gleichbehandlung von in der EU hergestellten Produkten und Importen aus anderen Ländern gewährleisten und Kohlenstoffverlagerungen verhindern.Translated with DeepL

carbon leakage rate:

change CO2 emissions aborad (+)

/

change CO2 emissions domestically (-)

A CBA is a charge on embodied carbon in products imported into a jurisdiction with carbon pricing.

By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU's climate objectives are not undermined. The CBAM is designed to be compatible with WTO-rules.

Large and growing disparities in carbon pricing across countries and regions has heightened interest in Carbon Border adjustments (CBAs) to address competitiveness and leakage concerns.

1. preserve the competitiveness of domestic industries in the presence of domestic carbon pricing, particularly for energy-intensive, trade-exposed (EITE) industries.

• preventing distortions in the relative prices of domestic and foreign goods (i.e., clean and polluting industries at home and abroad are treated alike) and can aid the political acceptability of carbon pricing;

1. reduce the risk of emissions leakage, that is, partially offsetting emissions increases in foreign countries induced by domestic mitigation policy

• Carbon leakage occurs when industries transfer polluting production to other countries with less stringent climate policies, or when EU products are replaced by more carbon-intensive imports.

1. to adopt domestic carbon pricing if that would reduce charges on their exports—in this case, the trading partner government would effectively transfer tax revenue to itself.

Carbon leakage occurs when companies based in the EU move carbon-intensive production abroad to countries where less stringent climate policies are in place than in the EU.

The European Green Deal (July 2021) sets out a clear path towards realising the EU's ambitious target of a 55% reduction in carbon emissions compared to 1990 levels by 2030, and to become a climate-neutral continent by 2050.

The July 2021 package in support of the EU's climate targets is an integral part of EU strategy to achieve this, and will further seal the EU's reputation as a global climate leader. As part of these efforts, the Carbon Border Adjustment Mechanism (CBAM) is a climate measure that should prevent the risk of carbon leakage and support the EU's increased ambition on climate mitigation, while ensuring WTO compatibility.

The CBAM will equalise the price of carbon between domestic products and imports and ensure that the EU's climate objectives are not undermined by production relocating to countries with less ambitious policies.

By ensuring importers pay the same carbon price as domestic producers under the EU ETS, CBAM will ensure equal treatment for products made in the EU and imports from elsewhere and avoid carbon leakage.

In principle, imports of goods from all non-EU countries will be covered by the CBAM. That said, certain third countries who participate in the ETS or have an emission trading system linked to the Union's will be excluded from the mechanism. This is the case for members of the European Economic Area and Switzerland.

If importers can prove, based on verified information from third country producers, that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted from their final bill.

The CBAM will initially apply to imports of the following goods:

• cement

• iron and steel

• aluminium

• fertilisers

• electricity

These sectors have a high risk of carbon leakage and high carbon emissions. The administrative feasibility of covering the sectors in the CBAM from the start was also taken into account.

Two alternative proposals to address carbon leakage are:

• international carbon price floor (ICPF) with graduated pricing to accommodate different levels of development as an alternative to CBAM

  a small number of key large emitting countries

  a minimum carbon price that each must put on their CO2 must be negotiated

  
  

• "climate club"

  a club of countries with similar climate policies would undertake harmonized emissions reductions and set an international carbon price. Nonparticipants would be penalized with uniform percentage tariffs when their products enter club countries. This proposal requires setting an international carbon price and minimum carbon abatement standards

  
  

European carbon pricing has a limited impact on competitiveness

Currently, the ETS price is just over €50 per tonne of carbon, and it applies only to certain subsectors of the manufacturing and energy sectors. The DNB analysis shows the consequences if the EU were to levy a tax of €50 per tonne of carbon on emissions in the energy, manufacturing and transport sectors. These sectors are chosen because this is broadly in line with the ‘Fit for 55’ proposals to extend the ETS to include the gas and transport sectors and to cancel the free allocation of allowances for the manufacturing sector and air transport.

At 0.5% in the EU the impact on export competitiveness is smaller than could be expected on the basis of the increase in production costs.

This is due to the fact that most EU Member States trade mainly with other EU Member States, which are also subject to a carbon tax.

The deterioration in export competitiveness in CEE countries is on average more than twice the EU average.

This is also the case for Greece and Cyprus because a relatively large share of exports goes to non-EU Member States.

Introducing a CBAM ensures that a level playing field is maintained in the single market as this also increases the costs of imports from countries that do not tax emissions or apply lower rates. However, a CBAM may also lead to a further increase in the production costs of European firms that use intermediate goods from outside the EU in their production process. At 0.2% this impact appears to be very low, however, because the use of non-EU intermediate goods is limited. The CBAM and carbon tax together increase EU import prices by 1.3% on average, compared to a 0.9% price increase in domestic production (see Figure 3). For most countries, including the Netherlands, the CBAM fully offsets any negative impact of a carbon tax on their competitiveness. Again, there are large differences between EU countries. Despite the CBAM, the competitiveness of half of the CEE countries still deteriorates slightly.

In practice, the effects of the carbon tax will probably be smaller than those shown in our calculations for several reasons Some firms will find reducing emissions to be less expensive than paying the carbon price, as intended. Also, our estimates are based on data for 2015, while carbon intensity has decreased significantly in the last couple of years. The calculations also show that the competitiveness of carbon intensive sectors in some countries could be significantly affected by a carbon tax, even with a CBAM in place. A CBAM will not prevent a deterioration in export competitiveness, which means that extra support measures might be needed for the sectors most affected by the carbon tax, like subsidies for emission reduction. Other temporary compensation measures could also be considered, such as extending the Social Climate Fund. It’s important, however, to ensure that such measures still incentivise emission reduction.

In practice, the effects of the carbon tax will probably be smaller than those shown in our calculations.

Some firms will find reducing emissions to be less expensive than paying the carbon price;

The estimates are based on data for 2015, while carbon intensity has decreased significantly in the last couple of years.

The calculations also show that the competitiveness of carbon intensive sectors in some countries could be significantly affected by a carbon tax, even with a CBAM in place.

A CBAM will not prevent a deterioration in export competitiveness, which means that extra support measures might be needed for the sectors most affected by the carbon tax, like subsidies for emission reduction.