Position on the implementation of alternative/complementary regulatory mechanisms to EU ETS

BACI addressed with letters to the Ministry of environment and water (MOEW) and the Ministry of Economy (ME) in the light of the new EU’s long-term budget proposal and the Own Resources package, which provides for development of new EU Own Resources that will not draw on existing resources of public revenue but will help Member States to address socio-economic inequalities and secondary impacts of the transition of all EU Member States to clean energy – Complementary regulatory mechanisms to the European emissions trading system in view of the Multiannual Financial Framework and EU Long-term Carbon Strategy.

We’re aware that some discussions have been initiated on a new OR system linked to environmental issues through the implementation of 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 proposal promotes the broad objectives of the new EU Strategic Agenda and is in line with the European strategic long-term carbon strategy “Clean planet for all”. 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.

This topic of alternative/ complementary regulatory mechanisms like Border Carbon Adjustments (BCAs) or Carbon Inclusion Mechanism (MICx) might be brought to the attention of the Council of the European Union or its working parties like Economic and Financial Affairs Council, where the position of the Member states will be required, therefore we’d like to share the position of BACI and the association of the European cement industry (CEMBUREAU) on the alternative or complementary mechanisms to EU ETS:

Any cross-border mechanism needs to include at least the following elements as part of its design:

  • applicable to all sectors alike to avoid discrimination, especially on downstream markets;
  • be based on real emissions of third country producers (and not EU average)
  • needs to be fully WTO compatible;
  • provide for an CO2 charge exemption for exporters
  • needs to be transitional in the sense that it co-exists with a free allowances system to start with whereby free allowances gradually phase out but can be brought back in case the carbon tax is considered incompatible with WTO.