The European Commission (EC) has announced that it has initiated a public consultation process on the Carbon Dioxide Emissions Regulation Mechanism (CBAM), which aims to address critical gaps and improve its effectiveness.
The consultations, which will last until August 26, require feedback on the extension of CBAM to processed products, the introduction of additional measures to prevent circumvention of requirements and the revision of the rules for accounting for electricity emissions.
These steps are aimed at reducing carbon leakage and enhancing CBAM's ability to take meaningful action on climate change, both inside and outside the EU.
The main objectives of CBAM are consultation:
Scope of application[b]Goal[/b]Processed productsPreventing carbon leakage in supply chainsProtection against circumventionStop manipulating product classifications to avoid CBAM accrualsElectricity emissionsMore accurately reflect decarbonization efforts in non-EU countriesThe EU is concerned that carbon leakage - when companies shift production to countries with more lax carbon regulations – could affect later stages of the supply chain. Without CBAM expansion, EU producers with lower carbon dioxide emissions risk being threatened by high carbon intensity imports. This undermines climate change goals and the competitiveness of industry.
Another direction is to eliminate circumvention tactics, such as minor changes to CBAM-covered goods to retrain them into non-CBAM goods, and routing production through intermediate countries to avoid fees. The EU proposes to tighten classification and reporting rules to ensure real compliance.
Currently, emissions from imported electricity are calculated using default values based on fossil fuels. However, this does not take into account the actual progress in decarbonization in exporting countries. Although importers may prefer to report actual emissions, current requirements are complex and sometimes impossible, including electricity purchase agreements, capacity ratings, and network congestion indicators. These conditions may inadvertently hinder decarbonization in non-EU regions, penalizing clean electricity producers who fail to meet stringent criteria.
