EU's Carbon Border Adjustment Mechanism CBAM and what to think about it?
The Finnish Forest Industries Federation (FFIF) organized a virtual breakfast event on Wednesday November 10 to discuss the EU Commission's proposal for a Carbon Border Adjustment Mechanism.
Senior Specialist Ilari Valjus of the Ministry of Finance gave a thorough introduction to the proposed mechanism and its possible effects, and the preliminary views of the Finnish government as well as the state of play of the legislative proposal. Valjus mentioned, as one of the Finnish government's views, that more analysis and information is needed before final decisions on the EU CBAM can be made.
Senior Economist Heli Simola of BOFIT (The Bank of Finland Institute for Emerging Economies) has assessed potential costs of the EU CBAM for emerging economies, more specifically China, India, Russia, Turkey, and Ukraine that are the EU’s largest import sources for products proposed to be subject to the CBAM. Simola's analysis suggests that the aggregate economic effects of the EU CBAM would be limited for most exporting countries. Some trading partners of the EU are also considering their own mechanisms for carbon pricing. According to research literature however, the best option would be a global carbon price, but this does not appear feasible currently.
One prerequisite for the CBAM, proposed by the Finnish government, was mentioned by both Valjus and FFIF's Trade Policy Manager Eeva Korolainen who moderated the event. Namely that the CBAM needs to prevent carbon leakage better and provide more benefits than the measures currently in place in the EU to prevent carbon leakage.
Korolainen closed the event noting that the FFIF fully supports the aims of the EU CBAM, namely pricing carbon and preventing carbon leakage, and encouraging also countries and producers outside the EU to reduce emissions. What the industry remains cautious about is the mechanism: the CBAM's ability to realize the mentioned aims and reduce emissions globally.