European Commission to monitor CBAM downstream price impact

The EU’s prospective carbon border adjustment mechanism (CBAM) will increase prices of imported products but should not have a huge impact on prices downstream, says Yiannis Zachariadis, policy officer at the European Commission’s Directorate-General for Taxation and the Customs Union (DG Taxud).

“We didn’t find evidence that CBAM would in fact trigger a carbon leakage in downstream sectors,” he said during this week’s Euranimi online conference attended by Kallanish. “That of course is on the basis of the analysis that we made and on the basis of carbon prices as they stand at the moment.”

However, DG Taxud will monitor the steel market in the future should carbon prices increase considerably, also causing downstream product values to hike. The authority is beginning to consider how to address “the proportion of CBAM products in the downstream products”, Zachariadis added.

“We are not in an anti-dumping situation when we apply a major [tariff] in 15 months,” commented DG Taxud policy officer Roberto de Micco. “We apply a major in 15 years. In 15 years, everything will be different, so whatever evaluation of today’s impact of CBAM on prices is unreliable because it compares export prices with domestic prices, and export prices will be different in 15 years because everyone is increasing their prices due to carbon constraints. That is what the Paris Agreement wants and it is what we asked third country partners at COP26.”

CBAM is designed as a behavioural instrument to push third countries to also apply a carbon price in their own domestic markets. The Turkish and Russian governments are already considering applying a carbon tax. The price of steel products will anyway go up globally amid decarbonisation, De Micco said. “CBAM is helping but the process that is pushing the carbon price up is a climatic process,” he concluded.

Natalia Capra France