Infographics CBAM 3479 04 December 2024
Governments are trying to find the most beneficial actions to support exports
The transition phase of CBAM has been in effect since October 2023. Many countries have already responded to the introduction of this instrument, which changes the rules of international trade. In general, three types of official reactions can be distinguished: opposition to the CBAM and attempts to prove its discriminatory nature, announcements of plans to introduce their own CBAMs, and adaptation of domestic carbon pricing to the CBAM application in the EU.
The biggest opponents of CBAM are considered to be the BASIC countries – Brazil, South Africa, India and China. At the plenary session of the UN Climate Conference COP29, these countries insisted on including the discussion of CBAM in the agenda.
The Brazilian government considers CBAM to be a discriminatory instrument that could do more harm than good in reducing carbon emissions. South Africa is concerned that CBAM is a unilateral measure that does not take into account the needs of developing countries. India considers the CBAM to be a discriminatory trade barrier and plans to challenge CBAM at the World Trade Organization. The Indian government has rejected proposals from the European Commission to increase the domestic carbon tax to minimize CBAM impact on Indian exports. China calls on the EU to ensure that the CBAM complies with WTO rules and considers it necessary to hold multilateral discussions on the CBAM.
The BASIC countries’ position is based on the Paris Agreement that provides for “the principle of equity and common but differentiated responsibilities and respective capabilities, in the light of different national circumstances”. These words can be interpreted as that developing countries cannot take on the same climate commitments as developed countries, and CBAM as a unilateral instrument undermines this approach.
Poland was the only country to vote against CBAM in the EU Council. The Polish government is currently challenging CBAM introduction in the Court of Justice of the European Union, arguing that CBAM is essentially a fiscal mechanism, and the approval of fiscal mechanisms requires the unanimous consent of all EU member states. The hearing of the case began in August 2023 and based on similar legal proceedings, the process could last two years.
Several countries plan to introduce their own CBAMs. The Australian government initiated feasibility assessment of introducing a local CBAM in the summer of 2023. The second round of consultations is currently underway, and a final decision has not yet been made. Four climate bills were submitted to the United States Congress in 2023. One of bills provides for the introduction of import duties on products with a higher carbon intensity than products produced in the United States.
Canada held public consultations on CBAM introduction in the fall of 2021, a decision has not been made yet and discussions are ongoing. Taiwan plans to develop its own version of CBAM by mid-2025. South Korea began consultations on CBAM introduction in August 2024.
The UK has confirmed the introduction of CBAM in January 2027. It will cover aluminum, iron and steel, cement, fertilizers and hydrogen. Products from the glass and ceramic industries will not be covered to give the government and industry more time to prepare. After 2027, the scope of the UK CBAM is planned to be reviewed to consider new evidence on the risk of carbon leakage.
Many countries have responded to CBAM introduction in the EU by developing their own domestic carbon pricing instruments (carbon tax or emissions trading system). This could be the first step towards the further introduction of global carbon pricing or, at least, the introduction of their own CBAMs in these countries.
Japan launched a pilot phase of emissions trading system (ETS) in 2023, with full implementation planned for 2026. Turkiye is set to launch an ETS in 2025, acknowledging that this decision was influenced by the introduction of the EU’s CBAM. Indonesia launched a carbon market (IDXCarbon) in 2023 and is currently continuing to work on carbon regulation. Israel is preparing to introduce a carbon tax.
Serbia, considering the European CBAM, is leaning towards introducing a local carbon tax. Vietnam plans to launch a pilot (trial) phase of the ETS in 2025. The Malaysian government believes that the country should introduce carbon pricing before the EU CBAM comes into full effect. The Moroccan government, concerned about the rapid deployment of the EU CBAM, is going to introduce a carbon tax in 2025.
Ukrainian steel industry may suffer the most from the European CBAM, since 93% of exports falling under the scope of the CBAM are iron & steel products. In the long term, Ukraine may lose all its exports of billets and long products.
According to Taras Kachka, Deputy Minister of Economy, Ukraine is already negotiating an exemption from the CBAM, taking into account the prospects of joining the EU. Currently, as part of its obligations to the EU, Ukraine is working on introducing its own emission trading system.
