EU's Carbon Border Adjustment Mechanism CBAM as a signal to the world
The Finnish Forest Industries Federation organized a virtual breakfast event on Tuesday May 4 to discuss the EU Emissions Trading System and the expected EU Commission proposal for a Carbon Border Adjustment Mechanism.
Director Maarit Lindström of the Finnish Forest Industries opened the event noting that the EU reduces greenhouse gas emissions within the Union but also wishes to put a price on carbon dioxide emissions occurring outside the union if the emission causing goods are imported into the EU. The mechanism inside the EU is the Emissions Trading System (ETS) and for the imported goods the EU Commission is to propose an adjustment mechanism (CBAM) at the EU border.
Member of Environmental and Industrial Committees, MEP Ville Niinistö (Greens) is closely involved in debates on both issues. While emphasizing the global climate goals and coming up with a global price signal for carbon as grounds for CBAM, he acknowledges that a balance needs to be struck with industrial competitiveness.
However, current carbon leakage prevention measures such as the free allocation of emission allowances cannot directly coexist with CBAM, due to international trade commitments that do not allow such double protection for domestic production.
– We need a global price for carbon and CBAM should be viewed from that angle. However, a challenge for the industry is the unknown and unpredictable nature of CBAM as opposed to the current system, admits Niinistö, and continued that the best goal for the proposal on carbon border adjustment mechanism should be encouraging the whole global economy to move forward with credible emission reductions.
Director Pasi-Heikki Vaaranmaa of the Trade Policy Unit of the Finnish Foreign Ministry is an experienced trade diplomat. According to him, a WTO-compatible CBAM would likely be possible but also very difficult to achieve technically. In any event, the measure could be viewed as protectionist by trading partners and become the subject of a trade dispute or even trigger countermeasures by trading partners.
The Finnish forest Industries is respectful of and supports the goal of global emission reductions. It is CBAM as a measure that the industry is doubtful about.