European Union (EU) Finance Ministers have reached a preliminary agreement on the implementation of the Carbon Border Adjustment Mechanism (CBAM). However, certain aspects, such as the phasing out of free allowances and the treatment of export rebates, still require resolution and will be discussed alongside separate reforms to the Emissions Trading System (ETS).
There have been calls to establish a clearer definition of indirect emissions, specifically in relation to electricity generated within the boundaries of the production facility responsible for manufacturing the goods.
Furthermore, there is support for expanding the coverage of CBAM to include a wider range of products made from aluminium. However, the compatibility of CBAM with World Trade Organization (WTO) rules has yet to be confirmed.
Germany continues to advocate for the creation of a ‘climate club’ as a means of mitigating the risk of trade conflicts arising from climate-related policies. Discussions surrounding this proposal are ongoing.
The agreement reached by the EU Finance Ministers marks an important step forward in the implementation of CBAM, but further deliberations and clarifications are still required to address remaining issues and ensure its effectiveness within the framework of international trade regulations.
