France Vows to Make EU Carbon Border Levy Top Green Deal Issue

(Bloomberg) -- France pledged to promote European Union efforts to put a charge on emissions-intensive imports when it takes over the bloc’s rotating presidency next year.

The European Commission plans to propose a draft law on the so-called Carbon Border Adjustment Mechanism in June, when it unveils a package of regulations to align the region’s economy to a tighter 2030 emissions target.

“We think CBAM is an essential element of the European Green Deal,” Laurent Michel, Director General for Energy and Climate at France’s Ministry for the Ecological and Inclusive Transition, said on Thursday.

The EU wants to lead the global fight against climate change and plans to toughen its 2030 emissions-reduction goal to at least 55% from 1990 levels. The existing target is a cut of 40%. The new import levy would help avoid carbon leakage, a phenomenon where producers move to regions with laxer pollution rules.

France, which has long called for a carbon border levy, will be chairing meetings of member states on the topic during its presidency in the first half of next year. With the series of steps necessary before CBAM is finalized, the import charge could realistically come into force in 2023 at the earliest.

The biggest challenge for the EU will be to ensure the new mechanism is compatible with the World Trade Organization rules.

“CBAM is not green protectionism,” Michel told a webinar organized by the European Roundtable on Climate Change and Sustainable Transition. “It’s an environmental issue that allows to increase climate ambition with a better way to avoid carbon leakage.”

The new levy will most likely operate as mirror image of the EU Emissions Trading System, the bloc’s carbon market that covers local manufacturers, utilities and airlines. In such a “notional ETS,” importers of carbon-intensive goods would have to pay a charge linked to the price of allowances in the EU ETS, the commission has said.

One of the biggest sticking points in the EU negotiations is set to be the issue of free emissions permits that the industry currently gets as protection against carbon leakage. While the Commission argues the bloc will need to stop handing out free allowances to emitters to be in line with WTO rules, the European Parliament said in a non-binding resolution last week that companies should continue to receive “substantial” free allocation.

The measure could include a transition period to phase out free allowances, according to Michel. It should allow for progressive implementation, with some pilot sectors at the outset. The EU should be pragmatic to enact it quickly.

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