Ref.
Ares(2021)70541 - 05/01/2021
Summary Report
Public consultation on the Carbon Border Adjustment Mechanism
(CBAM)
1. Background
The European Green Deal emphasized that “should differences in levels of ambition
worldwide persist, as the EU increases its climate ambition, the Commission will
propose a carbon border adjustment mechanism, for selected sectors, to reduce the
risk of carbon leakage”.1 If this risk materialises, there will be no reduction in global
emissions, and this will frustrate the efforts of the EU and its industries to meet the
global climate objectives of the Paris Agreement.
A Carbon Border Adjustment Mechanism (CBAM) would ensure that the price of
imports reflects more accurately their carbon content. This measure will be designed
to comply with World Trade Organization rules and other international obligations of
the EU. This measure would be an alternative to the current free allocation of
allowances or compensation for the increase in electricity costs that address the risk of
carbon leakage, because of carbon pricing in the EU’s Emissions Trading System
(ETS).
A public consultation was undertaken in relation to the introduction of the CBAM in line
with the Better Regulations Guidelines. This consultation was placed on the EU
website, which remained open for fourteen weeks from 22 July 2020 to 28 October
2020. The OPC questionnaire consisted of 43 questions: 38 closed-ended questions
and 5 open-ended questions and aimed to gather opinions from citizens and
organisations on the justifications, objectives, potential design and scope as well as
impacts of the initiative. Respondents were also allowed to upload position papers.
The responses to the public consultation are described below.
2. Respondents profile
A total of 615 respondents participated in the public consultation. Of these, 6
responses were duplicates, leading to 609 valid contributions. Almost 90% of the
consultation respondents (Figure 1) belong to one of the following three stakeholder
categories: i) company/business organisations (171); ii) business associations (170);
and iii) EU citizens (162). ‘Civil society (all other stakeholders)’ comprises academic
and research institutions, consumer organisations, environmental organisations,
NGOs, trade unions and any other stakeholders not included in the other three groups.
As regards the geographical distribution of respondents (Figure 2), most of them are
based in the EU (507 responses). A non-negligible share of responses (almost 17% of
the total) comes from third countries.
1
European Commission. (2019). The European Green Deal. (COM(2019) 640 final), p.5.
1
Figure 1: Type of respondents Figure 2: Countries of respondents
2.96% (18) 5.42% (33) 6.57% (40)
EU & non-EU citizens 4.76% (29)
12.81%
(78)
Companies & business Bordering countries
28.24% (172) associations
EEA+CH+UK
Civil society (all other EU
55.99% (341) stakeholders) 83.25% (507) Other non-EU
Public authorities
Source: Public consultation questionnaire responses
3. General Context
Respondent’s level of agreement with some general statements about introducing a
CBAM can be seen in Figure 3. Respondents seem to indicate that a CBAM can be
justified by differences of ambition between the EU and third countries when it comes
to fighting climate change, and that it can contribute to both EU and global climate
efforts. Most do not seem believe that a CBAM would impose unnecessary burdens on
the EU industry.
Figure 3: Level of agreement with the statements relating to the general
context of the CBAM
a. Putting in place an EU CBAM is justified if
differences of ambition between the EU and third 2.35 (542)
countries in fighting climate change persist
b. By reducing risks of carbon leakage, a CBAM
can help achieving the EU objective of climate
2.23 (540)
neutrality by 2050 and contribute to global climate
efforts
c. A higher price on some imported products due
to the introduction of a CBAM in the EU would be 2.28 (541)
acceptable if it contributed to global climate efforts
d. A CBAM would impose unnecessary burden on
1.07 (537)
EU industry
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
4. Justification and objectives
Most respondents appear to believe that carbon leakage is a real issue and that the
CBAM can address carbon leakage, foster consumption of low-carbon products in the
EU, and stimulate the deployment of low-carbon technologies and ambitious climate
policies in third countries (Figure 4). Mixed opinions were reported on the
effectiveness of current measures in the context of the EU ETS and state aid rules to
limit carbon leakage, and on the ability of other regulatory measures to reduce
2
greenhouse gas emissions. Finally, respondents seem disagree that the current
measures under the EU ETS can address carbon leakage sufficiently in regards to
enhanced climate ambitions in the EU.
Figure 4: Level of agreement with the statements relating to justification and
objectives of the CBAM
a. Carbon leakage is already a reality 2.28 (535)
b. Current measures to address the risk of carbon leakage under
the EU Emissions Trading System and State Aid Rules, such as
1.67 (519)
free allocation of allowances and indirect cost compensation are
effective in limiting the current risk of carbon leakage
c. Current measures to address the risk of carbon leakage under
the EU Emissions Trading System are sufficient in limiting the
0.91 (525)
risk of carbon leakage even in view of the EU’s enhanced
climate ambition
d. A CBAM could be effective in addressing the risk of carbon
2.09 (535)
leakage
e. A CBAM can be effective in encouraging the deployment of
less carbon intensive technologies and ambitious climate policies 2.13 (529)
in partner countries
f. A CBAM can lead to a change in consumption patterns in the
EU, by making available the choice of less carbon intensive 2.01 (527)
products
g. Reducing greenhouse gas emissions can be better achieved
through regulatory means such as performance standards for 1.60 (512)
products placed on the EU market
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
5. Design and Coverage of the Mechanism
Regarding the design of the mechanism, responses appear to indicate that all policy
options listed in the questionnaire are at least somewhat relevant for the design of a
CBAM (Figure 5). A tax applied on imported products associated with sectors at risk of
carbon leakage appears to be the most relevant option according to the respondents,
followed by a carbon tax at consumption level applied to all products (both imported
or produced in the EU) in sectors that are at risk of carbon leakage.
3
Figure 5: Most appropriate options to design the CBAM
a. A tax applied on imports at the EU border on a
selection of products whose production is in
sectors that are at risk of carbon leakage (e.g. a 1.30 (462)
border tax or customs duty on selected carbon
intensive products)
b. An extension of the EU Emissions Trading
System to imports, which could require the
purchasing of emission allowances under the EU 0.98 (464)
Emissions Trading System by either foreign
producers or importers
c. The obligation to purchase allowances from a
specific pool outside the ETS dedicated to imports, 1.05 (461)
which would mirror the ETS price
d. Carbon tax (e.g. excise or VAT type) at
consumption level on a selection of products
whose production is in sectors that are at risk of 1.10 (459)
carbon leakage and applied to EU production, as
well as to imports
0 1 2
Legend: 0 = Not relevant 1 = Somewhat relevant 2 = Highly relevant
Source: Public consultation questionnaire responses
Responses on products coverage of the measure are presented on Figure 6.
Respondents appear to suggest that the CBAM should focus on products from activities
already included in the EU ETS (especially those with the highest risk of carbon
leakage) and account for entire value chains.
Figure 6: Product coverage
The CBAM:
a. Should focus on products from activities
1.82 (471)
covered by the EU Emissions Trading System
b. Should focus on products from activities
covered by the EU Emissions Trading System 1.90 (471)
with highest risk of carbon leakage
c. Should not focus only on a product but
address the relevant parts of value chains related 2.19 (465)
to the product
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
On sectoral coverage, each respondent was allowed to select up to 10 sectors in the
on-line questionnaire. The following five sectors are selected more than 50 times by
the 609 respondents:
i) Electric power generation, transmission and distribution;
ii) Manufacture of cement, lime and plaster;
iii) Manufacture of iron and steel and of ferro-alloys;
iv) Manufacture of basic chemicals, fertilisers and nitrogen compounds, plastics
and synthetic rubber; and
v) Extraction of crude petroleum.
4
6. Implementation issues
There does not seem to be a consensus among respondents on the possible approach
that can be applied to compute the carbon content of imported products (Figure 7).
Respondents suggest that: i) both direct and indirect emission should be factored in;
ii) emissions should account for the entire value chain of products in different
countries; and iii) importers should have the possibility to demonstrate how the
imported product was manufactured, in a verifiable manner. To a lesser extent,
respondents appear to indicate that the approach should rely upon: i) the EU product
benchmarks for free allocation under the EU ETS; and ii) the Commission product
environmental footprint method.
Figure 7: Level of agreement on options to calculate the carbon content of
imported products
a. EU product benchmarks for free allocation under the
Emissions Trading System, i.e. the greenhouse gases 1.76 (355)
emitted during the production process
b. Country of origin-specific product benchmarks to be
1.40 (396)
defined for direct emissions
c. Global product benchmarks to be defined for direct
1.38 (380)
emissions
d. EU emission factors to be defined for indirect emissions,
i.e. the emissions caused by the generation of electricity 1.63 (362)
used to produce the covered product
e. Country of origin-specific emission factors to be defined
1.54 (379)
for indirect emissions
f. Global emission factors to be defined for indirect
1.21 (370)
emissions
g. A factor for both direct and indirect emissions taking
into account the production method used in the installation 1.89 (430)
were it was produced
h. A method that traces the build-up of emissions across the
1.98 (434)
value chain of a product in different countries
i. Giving importers the possibility to demonstrate in a
2.03 (446)
verifiable manner how the product was manufactured
j. The Commission Product Environmental Footprint
method (which is in line with the international standard ISO 1.78 (329)
14067 and considers both direct and indirect impacts)
k. Product Environmental Footprint Category Rules
developed based on the Commission Product
1.50 (350)
Environmental Footprint method, which also include a
benchmark reflecting average environmental performance
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
Moreover, a number of respondents specified that the carbon content of imported
products should be verified by an independent third party, and the CBAM should not
permit self-certification. In addition, most participants argued that the possibility to
grant a rebate to EU exporters should be explored under the CBAM.
The majority of respondents also expressed that the following avenues for
circumvention would appear to pose significant risks to the correct functioning of the
CBAM and should be prevented:
i) substitution between primary inputs and semi-finished goods;
5
ii) resource shuffling in the form of allocating low carbon production only to
the EU;
iii) transhipment strategies via exempted third countries; and
iv) avoidance based on minor modification of imported products.
The majority of the respondents seem to indicate that no exemption should be granted
and that all imports should be subject to a CBAM on an equal footing. Consulted
stakeholders, however, also leave room for exempting partner countries with
established climate policies that create incentives for emission reductions, similar to
those in force in the EU. In contrast, there is no agreement in respect to granting
credits for importing countries with climate policies generating carbon costs higher
than in the EU.
7. Expected impacts
7.1 Economic impacts
On economic impacts (Figure 8), the respondents recognise that the CBAM would: i)
encourage the consumption of low-carbon products; ii) have a positive impact on
innovation; iii) have a positive impact on the competitiveness of the EU industry; and
iv) have a positive impact on investment in the EU. They also appear to agree,
however, that it would lead to increased costs for EU businesses in downstream
sectors.
Figure 8: Economic impacts
The CBAM would:
a. Increase costs for EU businesses in downstream
2.24 (484)
sectors
b. Have a positive impact on the competitiveness
1.91 (477)
of EU industry in the sectors concerned
c. Negatively affect EU exporters in the sectors
1.66 (471)
concerned
d. Have a positive impact on investment in the EU 1.84 (462)
e. Encourage the consumption of less carbon
2.12 (480)
intensive products
f. Have a positive impact on innovation in the EU
2.11 (481)
and elsewhere by promoting clean technologies
g. Result in the relocation or replacement of
1.38 (466)
activities from partner countries into the EU
h. Result in the relocation or replacement of
activities from the EU to partner countries in the 1.42 (452)
downstream sectors to which CBAM would apply
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
7.2 Environmental impacts
Respondents generally suggest that the CBAM would have positive environmental
impacts. That is improving the effectiveness of policies against climate change,
reducing carbon emission globally, and promoting the adoption of ambitious climate
policies in third countries (Figure 9).
6
Figure 9: Environmental impacts
The CBAM would:
a. Improve the effectiveness of policies
2.19 (485)
aimed at fighting climate change in the EU
b. Effective in reducing carbon emissions
1.98 (485)
globally
c. Promote the adoption of similarly
ambitious climate policies by our trading
1.98 (484)
partners and thus contribute to the reduction
of global emissions
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
7.3 Social impacts
Respondents appear to indicate that the CBAM would have both positive and negative
social impacts (Figure 10). At the same time, they seem to agree that the mechanism
would avoid job losses in the EU, which would otherwise result from the relocation of
EU production to countries with lower climate ambitions. Respondents also appear to
indicate that the CBAM may: i) increase the price of consumer products; ii) lead to job
losses in downstream sectors; and iii) generate potential negative effects on the living
standards of the poorer segments of the population.
Figure 10: Social impacts
The CBAM would:
a. Avoid job losses in the EU due to the
substitution of EU production by production
1.84 (458)
from partner countries with lower climate
ambition
b. Increase the price of consumer products
including those related to basic needs 2.09 (467)
(depending on the sectors covered)
c. Have negative effects in terms of jobs in
sectors downstream from those to which it
applies by increasing the cost of their inputs, 1.78 (454)
which their competitors in partner countries do
not bear
d. Generate potential negative effects on the
living standards of the poorer segments of the 2.14 (438)
population (which should be compensated)
0 1 2 3
Legend: 0 = Strongly disagree 1 = Somewhat disagree 2 = Somewhat agree 3 = Strongly agree
Source: Public consultation questionnaire responses
7.4 Administrative burden
Relating to the administrative burden:
About 95% of respondents suggest that the CBAM could increase
administrative burdens for exporters and importers;
Almost 93% of respondents envisage an increase in administrative burdens
borne by public administrations in the EU; and
The majority of respondents appear to maintain that the CBAM is expected to
generate relatively higher administrative burdens for SMEs, however, almost
one third of respondents appear to disagree with this conclusion.