CEE Sustainable Finance Summit panel on an EU Carbon Border Adjustment Mechanism

CEE Sustainable Finance Summit panel on an EU Carbon Border Adjustment Mechanism

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On Friday, May 21, Geneviève Pons, General Director of Europe Jacques Delors participated in the CEE Sustainable Finance Summit panel on the EU Carbon Border Adjustment Mechanism, along with Peter VIS, Senior Researcher at the European University Institute of Florence and former Chief of Cabinet of Commissioner Connie Hedegaard, as well as other speakers from the field.

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CEE Sustainable Finance Summit

Geneviève Pons: “If we want to be carbon neutral, we need to have carbon intensive industries pay the price”

During her opening remarks, Geneviève Pons pointed out that “if we want to be carbon neutral, we need to have carbon intensive industries pay the price, not only in the European Union, but also abroad; emissions are a global problem”.

A CBAM should be designed and implemented to address one critical adverse effect of increased emissions reduction targets in the EU (-55% by 2030 / Climate neutrality by 2050), namely carbon leakage. Thus, in response to the question: “How essential is a CBAM for the overall success of the EU Green Deal”, Geneviève Pons answered that “CBAM is not about the success of the EU Green Deal: It is about the success of a global endeavor which is fighting climate change”.

According to Geneviève Pons, the main benefits of CBAM are 1) tackling carbon leakage in the context of higher carbon prices in the European Union, and 2) longer-term benefits on climate cooperation. “United States proactivity in carbon pricing will be necessary”, she added.

Asked about the shape of CBAM, Geneviève Pons said that it was likely to be a “notional, or a reflection” of the European ETS.

On CBAM’s international acceptability and World Trade Organization compatibility, Geneviève Pons made two important points.

CBAM cannot adjust for something that is not paid domestically. The European Union will have to ensure strict equivalence between the price paid in the European Union and the price paid at the border. The issue of the future of free allowances is particularly important here. They should be rapidly and simultaneously phased out to make way for CBAM.

As an integral part of the EU’s Own Resources Regulation, CBAM will naturally fall into the EU budget. However, and even if the proceeds cannot be earmarked, the EU should make clear from the start that CBAM is not created to repay Next Generation EU. We, at Europe Jacques Delors, recommend that the EU should use a significant part of the process to finance international “aid for decarbonization” funds benefitting developing countries and other trade partner countries most affected by CBAM.

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