Joint Statement on the EU Emission Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) Proposals

24 February 2022

The EU Emission Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) Proposals Need to Take into Account Downstream Industries

We, the signatories, representing a wide range of EU manufacturing industries (technology and engineering, automobile, home appliances, catering equipment, refrigerators, HVAC equipment) are convinced of the importance of our role in ensuring that Europe can deliver on its commitment to carbon neutrality by 2050 at the latest. As EU-based industries, we continue to invest to offer our products in line with ambitious environmental standards.

Carbon pricing as currently determined through the EU Emission Trading System is one of the key ingredients of the policy framework to realise climate neutrality but poses a risk if other countries do not follow suit, resulting in carbon leakage. A carbon levy on imports as proposed in the form of a carbon border adjustment mechanism could help address carbon leakage. Unfortunately, the current proposals lack attention for downstream industries.

Under the Commission’s ETS and CBAM proposals, manufacturing goods in the EU will incur additional costs that are not necessarily faced by third country manufacturing industries who produce the same goods. This will impact our sectors’ competitiveness on domestic and non-EU markets and may incentivise carbon leakage in manufacturing industries.

For the moment, the discussion on CBAM has been focused on primary materials and little consideration has been given to the downstream industries in Europe that use those goods in their manufacturing. Despite the fact that the CBAM will have a significant impact on our supply chains and input costs in the future. We support the CBAM as one important element of a broad and comprehensive package of measures to address climate change. However, we need to get this important policy right to prevent causing permanent damage to the EU economy and its manufacturing industry.

We call on the Commission, Council, and European Parliament to take the necessary steps to assess the competitiveness impact of CBAM on downstream users of goods that will be subject to this measure to help prevent carbon leakage from EU manufacturing to outside Europe, before the financial impact of CBAM harms EU industry.