Lawmakers criticise plan for ‘CBAM reserve’ in EU carbon market reform

(EurActiv, 20 Jan 2022) An EU lawmaker’s proposal to put aside free pollution permits for industry in case plans to replace them by an external EU carbon tariff fails, has been criticised by his fellow lawmakers in the European Parliament.

Carbon-intensive industries currently receive free allocations under the EU emissions trading scheme (ETS) in order to prevent carbon leakage, where companies move out of Europe to places where it is cheaper to pollute.

But free allocations have long been criticised by environmentalists who say it undermines Europe’s decarbonisation efforts, and calls have grown to eliminate them over time.

So last year, the European Commission put forward a plan to phase out free allocations and replace them with an external tariff on imports of carbon-intensive products, the so-called carbon border adjustment mechanism (CBAM).

Those plans are now being examined in the European Parliament, where a German conservative lawmaker, Peter Liese, is in charge of drafting the assembly’s position on the EU’s proposed carbon market reform.

Presented last week, the draft Liese report adds a layer of protection for carbon-intensive industries currently covered by the free allocation scheme. Liese’s proposal is to establish a reserve to maintain free allocations in case CBAM fails.

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EurActiv, 20 Jan 2022: Lawmakers criticise plan for ‘CBAM reserve’ in EU carbon market reform