Lhe European Council reached an agreement on March 15 on the regulation establishing a carbon border adjustment mechanism (MACF). It is now examining the proposed reform of the emissions trading system (ETS).
the European Parliament must, meanwhile, decide on these texts on June 7, 8 and 9. These two texts are key to enabling the European Union to achieve climate neutrality by 2050.
“Carbon Leaks”
When this system comes into force, European industries in the sectors concerned (steel, aluminium, electricity, fertilizers and cement) will no longer benefit from free carbon quotas. At the same time, in order to avoid “carbon leakage”, i.e. the risk of relocation of activities that emit high levels of CO2 to third countries, the MACF will require importers of these same products to buy carbon quotas.
As it stands, while this new mechanism provides a “price signal” to stimulate low-carbon investments in the sectors concerned, it effectively transfers the risk of carbon leakage to downstream industries. For example, European manufacturers of mechanical parts, compressors, batteries, food processors or construction materials will see their production costs increase within the European Union due to the reform of the ETS and of the introduction of the MACF.
But these same products manufactured in third countries and then imported into Europe will not be impacted by the system since the MACF and the ETS only take into account raw materials. The carbon border tax presents ignored risks of offshoring.
A loss of competitiveness
While we welcome the initiative for a carbon border adjustment mechanism as a new stage in the European Union’s ecological transition, we believe that this transition should not be made at the cost of new relocations or to the detriment of competitiveness. of our industries.
However, the mechanism, in its current state, risks having effects that run counter to the objective sought: instead of encouraging the decarbonization of production in third countries and the procurement of lower-carbon raw materials for the sectors downstream, this mechanism will encourage European customers to acquire products manufactured outside the Union at a lower cost and will lead to a loss of competitiveness for European industrialists on exports.
The loss of competitiveness of European companies using covered products will lead to significant carbon leakage and relocation. In the short term, a large part of the European production chain will be weakened, undermining the ambition to regain our economic and industrial sovereignty, of which the Ukrainian crisis and the pandemic have reminded us of the capital urgency.
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