The European Commission may be granted the authority to exempt certain goods from the Carbon Border Adjustment Mechanism (CBAM) in the event of global crises. The maximum duration of such a tariff exemption is two years. This compromise was proposed by Cyprus, which currently holds the presidency of the Council of the EU.
This is evidenced by an internal document obtained and analyzed by Politico.
Revision of the CBAM
The CBAM requires companies to pay for greenhouse gas emissions caused by the production of certain goods. Specifically, this applies to sectors such as the steel and cement industries.
The mechanism only came into effect in January, but has already become a topic of discussion among governments in the EU Council and lawmakers in the European Parliament. They are currently coordinating their positions on its revision.
Emergency braking
As part of the review, the European Commission has put forward a rather controversial proposal: to create an "emergency braking mechanism." In the event of unforeseeable circumstances of a critical nature, this mechanism would allow certain goods to be exempted from the application of the CBAM.
Part of the industry was outraged by this proposal, as were some Members of the European Parliament. However, the compromise from Cyprus shows that governments are not easing up on the pressure after all.
Clarification of the Provision
The document elaborates on this provision. It is proposed to apply it not only in general crisis situations but also when supply chain disruptions or pricing distortions occur. It is envisaged that such a suspension would last for one year, with the possibility of extending it for another year.
The draft also codifies the European Commission’s previously stated position on limits within the emissions trading system. If certain goods are temporarily exempted from the CBAM, companies will continue to receive free emission allowances under the ETS, and their gradual phase-out will be suspended for this period.
EcoPolitic previously reported that the EU proposed measures to mitigate the impact of the EU ETS on industry. In particular, the EU may suspend the practice of cancelling excess emission allowances.
