The Carbon Border Adjustment Mechanism (CBAM) must be linked to the EU  Emissions Trading System discussions so as not to undermine the integrity and ambition  of the Fit for 55 package  

Civil society organisations express concerns about the agreement reached in COREPER II on a  CBAM compromise text that does not address important issues linked to the EU Emissions Trading  System (ETS) Directive and other key aspects of the Fit for 55 package. 

On 15 March, EU Ministers for the economy and finance will discuss the implementation of a  Carbon Border Adjustment Mechanism (CBAM), aiming at agreeing on a ‘general approach’,  during the Economic and Financial Affairs Council meeting (ECOFIN).  

As NGOs, we support a fair and effective CBAM, designed and implemented as an alternative to  current EU ETS carbon leakage measures such as free allowances and indirect cost  compensation. We believe that agreeing on a CBAM separately from the EU ETS Directive would be  detrimental to its implementation, and risk undermining the level of ambition and  decarbonisation incentives of the Fit for 55 package.  

Thus, we demand that these key safeguards guide the ongoing negotiations on CBAM:  

  1. Ensure the integrity of the package and its ability to deliver on and exceed the level  of ambition. The Economic and Financial Affairs Council must defend the integrity of the Fit  for 55 package and its ability to achieve the at least 55% net emissions target. CBAM is a key piece of this package and cannot be discussed and agreed upon in isolation.  Furthermore, the political desire to find a rapid compromise on CBAM risks undermining  incentives for industry to decarbonise, and jeopardising the EU’s ability to reach its  increased 2030 targets.  
  2. The CBAM cannot be separated from ending free pollution permits under the EU  ETS. Any discussion on CBAM cannot avoid addressing its interaction with current carbon  leakage measures under the EU ETS. As a climate policy tool aimed at incentivising  emission reductions within the EU and globally, CBAM must only be implemented as an  alternative to current carbon leakage protection measures for the covered CBAM sectors.  Free allocations and compensation for indirect costs remain central weaknesses of the EU  ETS, are an ineffective and wasteful use of public resources, and continue to 

undermine the business case for greenhouse gas reductions. The full phase out of free  allowances will ensure the application of the polluter pays principle, render the EU ETS more  effective, and lead to a more equitable rebalancing of investment in climate action  measures. It will also strengthen the CBAM’s case under the WTO as an environmental  measure which is non-discriminatory towards third country producers.  

For more information:  

Camille Maury, Policy Officer, WWF European Policy Office: cmaury@wwf.eu

Agnese Ruggiero, Policy Officer, Carbon Market Watch: agnese.ruggiero@carbonmarketwatch.org 

Domien Vangenechten, Policy Advisor Industrial Transition, E3G: domien.vangenechten@e3g.org 

Doreen Fedrigo, Industrial Transformation Policy Coordinator, CAN Europe: doreen.fedrigo@caneurope.org