PR Event: “CBAM in action: Lessons Learned & Industry Perspectives - One year of CBAM
/Geneva, 6 November 2024. AEGIS Europe, Cassidy Levy Kent Europe (CLK Europe) and the Geneva Graduate Institute co-organised an event in Geneva to present the experience and lessons learned under the EU’s CBAM during the transitional phase, and report on the first months of implementation of CBAM. In addition, the event examined carbon pricing policies and border measures that have been enacted or are being considered in other countries.
Special attention was devoted to their impact on competitiveness and the views of industry in respect of CBAM and related measures. One of the goals of this event was to share the views and experience of the industry and to bring WTO Member delegates and other Geneva-based stakeholders in contact with industry voices experiencing CBAM and related measures on the ground.
The introductory remarks were delivered by Joost Pauwelyn (professor at the Geneva Graduate Institute and founding partner of CLK Europe), who outlined the three main themes to be addressed during the event. ▪ Lessons learned from the first year of CBAM’s transitional phase implementation, along with the data gathered thus far. ▪ Third countries reactions to CBAM and the potential for the system to be replicated elsewhere. ▪ Industry perspective, focusing on the challenges that the companies face in relation to the measure.
After the introductory remarks, the event kickstarted with the insights from the European Commission Head of Unit for CBAM, Energy and Green Taxation within Directorate-General for Taxation and Customs Union (DG TAXUD) Vicente Hurtado Roa, who shared the report of the first months of CBAM implementation. The key findings stem primarily from the analysis of the data collected by the European Commission to date.
▪ It was showed that in the first year of operations most of importations (i.e. around 80% in terms of volume) have been made by less than 20% of all importers.
▪ In terms of default values and actual emissions, the last reporting covering Q3 2024 revealed that around 50% of the declarations are made using actual emissions, despite the fact that one has the possibility to use default values.
▪ In 2025, likely in July, the European Commission is bound to publish a report on the impact of CBAM and on the possibility of extending, by 2030 at the latest, the scope of the measure also to other EU ETS sectors.
▪ Other important elements that the European Commission is currently collecting and analysing data on are the impact of CBAM on the EU industry, the question of the phasing out of the free allowances and the impact on exports. ‘’The introduction of CBAM is a measure on the imports, but the idea is also to analyse the impact on the exports’’, said Vicente Hurtado. On the complexity of the mechanism, he added “We will come up with some simplifications that will solve many issues for small importers and exporters, metrics and verifications, but we are still discussing internally; and more will be revealed at the beginning of the year.’’
The panel continued with the intervention of Dr. Chantal-Line Carpentier (UNCTAD), presenting a report issued by the WTO, World Bank, IMF, OECD and UNCTAD on Carbon pricing, policy spillovers, and global climate goals. Ms Carpentier presented the point of view of international organizations and developing countries on the CBAM. She reminded everyone that different countries might have different approaches to carbon measures, different ambitions and means to achieve them as enshrined in the Paris Agreement, pointing out the principle of Common but Differentiated Responsibilities (CBDR). Furthermore, many developing countries, especially LDCs, might not yet be ready to implement similar measures and rather use different tools such as subsidies and taxes, which OCED countries have tended to use before getting to carbon pricing.
As for the role of international organisations, it was said that they can assist the European Union with CBAM, and others with coordination and cooperation on these Border Carbon Adjustments, especially when various mechanisms with different requirements, measures and products will be put in place in different countries. The Report also mentions the cross-border spillover effect, namely the EU CBAM could positively impact third countries to also consider carbon price measure, by stimulating investment in renewable energy, green technologies etc., and at the same time by possibly reducing the demand for fossil fuels, that developing countries still heavily rely on. However, it will also negatively impact terms of trade of developing countries.
As a general tenet, carbon border measures should be designed so that they maximise the greenhouse gas effect reduction while minimising the adverse impact on third countries, considering that some of the latter need assistance to decarbonize their economy and fulfil required monitoring, verification and reporting costs. Inès Van Lierde (Co-chair AEGIS Europe) took the floor to present AEGIS Europe’s work and its position on CBAM. AEGIS Europe is an alliance representing more than 20 sectors that account for more than 500 billion euros in annual turnover and millions of jobs across the EU. ‘’Our priority is that our 2 members compete on a level playing field, fair and international competition: we should be giving priority to fair trade over free trade’’.
Renaud Batier, (co-chair of AEGIS Europe and Director of Cerame Unie), presented the industry’s concerns and asks. Among the concerns, he pointed out the need to simplify and reduce the administrative burden, not only for SMEs but also for larger companies as such burden might disincentivize investment in the EU. Other issues that he reported concern the difficulty in accessing accurate emissions data from suppliers, and the problem of double reporting. The latter represents an issue since European installations under the EU ETS system exporting goods outside Europe, that are then processed and re-imported as further complex goods listed in Annex I of the CBAM Regulation, are required to double report emissions data already provided under the ETS system to their suppliers in third countries. A very important point that was stressed by Renaud Batier is the need to assess the effectiveness of CBAM before extending its scope, and this assessment should have as a departing point a consultation of the industry. To do so, it is important to define the assessment criteria which will be used and to conduct a prior thorough impact assessment by consulting the industries concerned. Another element of paramount importance for the industries is the export dimension, as stressed in the Draghi report: “CBAM needs a WTO-compatible export solution for CBAM sectors to avoid carbon leakage and the replacement of EU low-carbon products with high-carbon alternatives on global markets’’ said Renaud Batier.
There is a high risk of circumvention of the tool: anti-circumvention rules must be strengthened to ensure the effectiveness of the measure and avoid practices such as resource shuffling. Finally, after one year of transitional period, some of AEGIS Europe’s members have experienced issues with carbon footprint data reporting in terms of accuracy, veracity and overall quality. These issues also increase the risk of circumvention and further undermine the efficiency of the CBAM. Once again, the industry calls for its involvement in the assessment of carbon footprint data.
After the industry perspective, Joost Pauwelyn opened and moderated the roundtable, with the interventions of Vicente Hurtado Roa (European Commission, DG TAXUD), Chantal-Line Carpentier (UNCTAD), Adolfo Aiello (Eurofer), Aashish Chandorkar (Indian Mission to the WTO) and Ben Rake (UK Mission to the WTO). Aashish Chandorkar (Indian Mission to the WTO) provided valuable insights about how certain developing countries reacted to the EU’s CBAM. He stressed once again the Common but Differentiated Responsibilities (CBDR) principle and highlighted the risk of fragmentation stemming from various CBAMs implemented around the world: if each of them employs a different way of defining emissions and measurement thereof, then SMEs would have difficulties in navigating so many various rules that refer to the same thing but in slightly different ways.
Ben Rake (UK Mission to the WTO) provided his overview on the recently adopted UK CBAM, stressing that the UK government is carefully listening to the public and to the industry. He also reminded that there is an agreement on the need to strengthen the international cooperation around the various CBAMs. Adolfo Aiello (EUROFER) shared the perspective of the EU steel industry, the largest sector subject to the CBAM, stressing that the steel sector has an important element of complexity due to different production methods with different emission intensities, and global trade patterns. While simplification is fundamental, the trade off should not be less effectiveness. About transparency, he mentioned that the steel sector believes that the CBAM should mirror the functioning of the ETS, where a lot of information about EU companies is publicly available. He stressed once again that the export dimension of the CBAM should not be overlooked and be seen as a priority.
The audience addressed some questions to the speakers referring to aspects such as: simplification, lower administrative burden, effectiveness, circumvention, loopholes, exports, resource shuffling, inward processing and outward processing. The conclusions were presented by Hervé Jouanjean (CLK Europe) and Yves Melin (founding partner of CLK Europe). Hervé Jouanjean stressed the importance of the key words used during the event, which should also be the key elements on which the European Commission will have to work on, such as simplification, coordination, fragmentation, loopholes, resource shuffling, circumvention, administrative burden, exports dimension. Yves Melin identified two issues within the CBAM that the European Commission should address: the first one is effectiveness, since CBAM declarants will be responsible for placing the goods on the EU market, the screening of who can be a declarant must be effective bearing in mind that the declarants in question will face pressure from their customers and difficulties in verifying the accuracy of the emission data they get. Secondly, exports: an export adjustment would be WTO compatible, and it is critically needed to ensure that the EU’s industries, leading in decarbonation, are allowed not just to survive, but to strive. The EU won’t be able to achieve its goal to decarbonise the production of goods consumed on its market if EU industries are not incentivised and sufficiently competitive on world markets.
Overall, the criticalities that emerged during the discussion were:
The complexity of the system and the administrative burden. Simplifications are needed.
The effectiveness of CBAM and the criteria to assess it. Effective enforcement is critical.
The need to strengthen international cooperation and coordination around carbon leakage measures.
A high risk of circumvention of the tool, especially via resource shuffling, and a need to address loopholes; the risk of circumvention must be monitored at customs level. The authorisation process for CBAM declarants should ensure that they are sufficiently skilled to detect this.
The absolute need of an export solution to ensure that the EU industry, leading on decarbonation, can carry out its activity on level playing field and thus its competitiveness is not undermined on global markets to the detriment of the environmental objectives of the EU’s CBAM and ETS.
Looking Ahead CBAM represents a transformative step in global climate policy, but its success hinges on effective implementation and international cooperation. Without addressing critical challenges such as export competitiveness and anti-circumvention measures, the mechanism risks undermining European industries, potentially driving production—and higher emissions—overseas. As the EU refines its approach, industry and policymakers must collaborate to ensure that the CBAM strengthens GLOBAL’s decarbonisation efforts while safeguarding its industrial base. The upcoming 2025 impact report will be pivotal in determining CBAM’s effectiveness and its role in preventing the deindustrialisation in the EU.