EC develops standardized carbon prices as part of CBAM simplification

The European Commission is working on defining standard prices for carbon credits for countries, sectors and commodities as part of the CBAM simplification package. This was announced during a thematic webinar organized by Esade and Fundación Repsol, said EC representative Vicente Hurtado.

According to him, this is somewhat similar to standard emission values. The idea is to analyze those carbon pricing systems that are transparent and well known, and then, based on that, determine a certain standard carbon price for those goods imported into the EU. This is a way that will take into account countries’ decarbonization efforts.

In this way, the EU will assess the equivalence of climate policies and carbon pricing mechanisms in third countries. As a general rule, the CBAM applies the EU ETS price to imported goods. If a certain price for carbon has been paid (under the emissions trading system or carbon taxation), it must be deducted.

According to David Cruz, CBAM specialist at Norwegian CEMAsys, this is a difficult task for more than 700+ CN codes. The purpose of this work, in his opinion, is to estimate a fair reference price for carbon credits when real data is not available, especially for goods from countries without formalized carbon markets. It also proposes a single methodology that takes into account global trade and promotes transparency.

On April 23, the European Parliament’s Committee on International Trade (INTA), according to Gecic Law, supported the EC’s plan to simplify the mechanism of cross-border carbon adjustment as part of the Omnibus I legislative package.

The main changes include an exemption for small importers. Those who receive less than 50 tons of goods covered by the CBAM in a year will no longer need to report emissions. This step exempts about 90% of companies from the CBAM rules, but leaves more than 99% of import-related CO2 emissions covered.

It also provides for simplified reporting (authorization process for declarants, methods for calculating emissions) for large importers exceeding the threshold of 50 tons. Companies will receive assistance in managing financial obligations under the mechanism.

However, measures to counteract circumvention will be strengthened, including changing the route of supply of goods or changing the classification of products.

Last month, the EC officially published the rules for authorization of CBAM declarants in accordance with the implementing regulation. The application process opened on March 28.

According to an updated estimate by GMK Center, Ukraine may lose $7.2 billion of GDP by 2030 as a result of the introduction of the cross-border carbon adjustment mechanism. Export losses over the same period could amount to $4.7 billion, including $3.3 billion of steel products.