BACI addressed a letter to the Ministry of finance in the light of the recently presented European strategic long-term carbon strategy “Clean planet for all” and its ambition for a prosperous, modern and competitive European economy. Implementation of this long-term vision implies recasting of the basic EU policies, among which the industrial policy, which has to foster innovation and ensure the competitiveness of the European industry. Potential losses of competitiveness will result in carbon leakage, i.e. transfer of carbon and energy intensive industries in countries with less stringent regulation. The European emissions trading system (EU ETS) – the main instrument for decarburization of the European economy, the European Commission has tried to protect the sectors, exposed to carbon leakage by providing them with free allowances up to the level of the best performers in the sector. The analysis joined with the communication on the long-term vision “A clean planet for all” and numerous sectoral studies confirm that the risks of competitiveness losses and therefore of carbon leakage are real for the exposed sectors, in absence of protective measures. It is therefore necessary to continue to tackle carbon leakage risks in the EU ETS, while working to convince other jurisdictions to put in place equivalent regulations.

In parallel to the work on the EU ETS phase IV legislation, we are aware that some discussions have been initiated on alternative/ complementary regulatory mechanisms like Border Carbon Adjustments (BCAs) or Carbon Inclusion Mechanism (MICx), which aim at aligning the requirements to the carbon intensive industry in EU and in third countries. This topic might be brought to the discussion on the forthcoming meeting of the Economic and Financial Affairs Council (July 9th 2019), therefore BACI shared with the Ministry of finance its position and the identical position of the Association of the European cement industry (CEMBUREAU) on the alternative or complementary mechanisms to EU ETS:

• regardless of the specifics of the proposed system, it needs to be assessed on its coherence with the EU ETS, its workability and legal compliance;
• it has to be applied to all energy-intensive sectors alike without discrimination;
• it has to be complementary to the free allowances system under EU ETS, which sets the bases for the carbon leakage protection;
• it has to provide long-term legal certainty, especially in relation to trade (WTO compliance), and has to ensure a level playing field in the export markets;
• it has to provide a level playing field between importers and EU producers: importers need to pay in relation to their actual emissions level (not to an average EU emission level) and in order to guarantee carbon neutrality of the products on the European market, the transport emissions to the borders of the EU need to be included.