Improving Border Adjustment Mechanisms

The Institute for International Trade (IIT) releases a major new paper on Carbon Border Adjustment Mechanisms (CBAMs).

Europe is well down the road toward the implementation of a CBAM that will require importers to pay a carbon charge equivalent to that required of European producers by 2026. Currently limited to imports of iron ore, steel, cement, fertilizers, aluminium and electricity, serious EU consideration is being given to the expansion to the other 60 or so products covered by their emissions trading system and to earlier commencement.

CBAMs are contentious, and not least for the multilateral trading system. A number of countries, including Australia, are considering mounting legal challenges to the EU’s intended legislation.

To enrich the EU and wider international debate, this working paper proposes ten principles that a club of nations interested in preventing the leakage of jobs and investment away from climate progressive nations should adopt.

These include: 

• Limitation of the use of trade mechanisms to truly global environmental problems such as climate change and plastics contamination in the world’s oceans;

• Mechanism exemptions for imports from any country that has been making an equivalent contribution to the reduction of the environmental problem; 

• A requirement that the import charges take full account of equivalent, including indirect, price signals such as Australia’s requirement for a proportion of all electricity to be produced from a renewable source;

• Objectivity in the provision of concessions to least developed countries; and

• A requirement that imports from a country cannot be exempted from the mechanism unless in accordance with the proposed principles.

These principles are then used to identify opportunities to improve the EU’s proposed CBAM. 

This compelling paper is written by Mike Young, Professor Emeritus in Energy, Water and Environmental Policy, The University of Adelaide. For the ITT news post and links to the working paper and media release please follow the link here:

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#carbonmarkets #carbontax #cbam #internationaltrade #internationalbusiness #greeneconomy #environment #greengrowth #climatechange Peter Draper Mike Young University of Adelaide European Commission Australian Department of Foreign Affairs and Trade World Trade Organization World Economic Forum OECD - OCDE