To fight climate change, fight carbon leakage

Gernot Blümel is Austria’s federal minister of finance. Leonore Gewessler is Austria’s federal minister for climate action, energy, mobility and technology. Alexander Schallenberg is Austria’s federal minister for European and international affairs. Tomáš Petříček is the Czech foreign minister. Dan Jørgensen is Denmark’s minister of climate, energy and public utlities. Jeppe Kofod is Denmark’s foreign minister. Nicolai Wammen is Denmark’s minister of finance. Jean-Yves Le Drian is France’s minister for European and foreign affairs. Bruno Le Maire is France’s minister of the economy, finance and the recovery. Barbara Pompili is France’s minister for the ecological transition. Simonas Gentvilas is Lithuania’s minister for the environment. Jean Asselborn is Luxembourg’s foreign minister. Carole Dieschbourg is Luxembourg’s minister for the environment, climate and sustainable development. Pierre Gramegna is Luxembourg’s minister of finance. Eduard Heger is Slovakia’s minister of finance. Nadia Calviño is Spain’s minister for economic affairs and digital transformation. Teresa Ribera is Spain’s minister for ecological transition. Wopke Hoekstra is the Dutch finance minister. Hans Vijlbrief is the Dutch state secretary for finance. Bas van’t Wout is the Dutch minister of economic affairs and climate policy.

More than five years after the adoption of the Paris Agreement, global climate action is more pressing than ever. 

A number of positive developments have raised hopes that we can meet the global challenge with a collective response. The European Union has endorsed the objective of achieving climate neutrality by 2050 and more than 130 countries, representing around 65 percent of global emissions, have drawn up or are considering plans to hit similar targets. The United States’ decision earlier this year to rejoin the Paris Agreement was also a welcome step. 

And yet, we are still falling short of our goals under the Paris Agreement and urgently need do more.  

EU leaders have already decided to step up the bloc’s net emission reduction target for 2030 to at least 55 percent compared to 1990 levels. This is an encouraging step in the run-up to the COP26 climate talks in Glasgow later this year. 

But there still is a looming challenge to reaching our common goals: how to ensure that the EU’s ambitious climate policies do not simply shift emissions to other countries that do not yet share our level of commitment.  

The risk of so-called “carbon leakage” is growing as divergences in countries’ climate ambition widen. This is of concern for two reasons. First, it undercuts the efficiency of our climate policies at a global level, because other countries will pollute more in order to produce the goods we need and consume. Second, it threatens to undermine popular support for our ambitious climate agendas.  

It is the responsibility of EU leaders to take swift action to address this issue in order to preserve and strengthen the integrity of our climate policies.  

That is why we need a proposal for an EU Carbon Border Adjustment Mechanism by 2023 that is effective, legitimate and fair. Effective, because it can tackle carbon leakage better than existing instruments. Legitimate, because it will be in full compliance with the international rules laid down by the World Trade Organization and consistent with the framework of the Paris Agreement. And fair, because it will be implemented in a transparent and coordinated manner with our trading partners, without discriminating between domestic and foreign producers. 

To this end, we call on the European Commission to bring forward a proposal compliant by WTO rules by the summer that favors a Carbon Border Adjustment Mechanism, ensuring non-discrimination and a good articulation with the EU Emissions Trading System, which could mirror the European carbon market.

The mechanism must also retain robust and fair benchmarks for the calculation of the adjustment. This could be based, at first, on a default value for the carbon intensity of imported products. while allowing importers to the EU to demonstrate the lower carbon intensity of their products, thereby providing an incentive for better climate efficiency. 

The proposal must also take into account the climate policies and level of development of third countries by including them in the design and monitoring of the mechanism. It should adopt a gradual approach that could first apply to a limited number of pilot sectors facing a high risk of leakage and in which the mechanism is technically and administratively feasible. And it should address the issue of carbon leakage occurring through third markets for European exporting sectors. 

The EU was successfully built upon a commitment to multilateralism. The EU Carbon Border Adjustment Mechanism will contribute to this core value. We therefore look forward to discussing the Commission’s proposal together with the other EU member countries and the European Parliament. 

This is not “green protectionism.” On the contrary, it is an opportunity to enhance international climate cooperation and coordination. 

At the end of the day, the overarching objective of the EU Carbon Border Adjustment Mechanism is to create momentum for the benefit of all and help achieve our collective ambitions to tackle the urgent climate challenge we all face.