Amendments to the European Commission’s Carbon Border Adjustment Mechanism (CBAM) proposal

Introduction

• Base default values on 10% worst performers. The Commission’s proposal to use default values based on average CO2 emissions of the price-setting source might not be sufficiently penalising if this source is not a worst performer. Instead, specific default values should be based on the 10 per cent of worst performers from the exporting country or its exporting sub-region from the outset, which would incentivise electricity exporters to provide actual data in order to lower the CBAM charge incurred.
• Account for indirect CO2 emissions in simple and complex goods. The fact that indirect CO2 emissions in simple and complex goods are not accounted for incentivises the imports of goods produced with CO2-intensive electricity sources, which can create significant risks for the environmental integrity of the fit-for-55 package, as well as competitive distortions between EU producers and third countries. Through close cooperation with Eurelectric and others, data on indirect CO2 emissions present in complex goods imports could hopefully be properly accounted for and charged once the CBAM fully enters into force.
• Avoid double protection. For sectors where a CBAM is in place, free allocation should be removed. We therefore welcome the Commission proposal to phase out free allowances for CBAM sectors in this regard. The current CBAM design however does not provide coverage to the EU’s exporting sectors, which we hope can be addressed in some shape or form.
• Include hydrogen imports into the CBAM. Though hydrogen imports are currently limited, it is anticipated that this will increase significantly in the near future. For hydrogen and its derivatives (e.g. ammonia) that are imported, the EU should ensure that this is as decarbonised as possible. We propose to include hydrogen and its derivative sectors in the first CBAM design, both their direct and indirect emissions. This should be coordinated with the introduction of a harmonised certification system that can distinguish different forms of hydrogen.
• Manage administrative complexity for importers of electricity and EU member states. To limit administrative complexity for entities/importers of goods that will be included in the CBAM, all provisions should be carefully examined (e.g. the 80% CBAM certificate registry rule) and then simplified as much as possible, which in turn increases the chance of compliance. The possible creation of CBAMs in other parts of the world should also be anticipated and where possible coordinated. Furthermore, standards need to be unified and transparency ensured in the functioning of the CBAM to not create excessive administrative burdens for the Member States.