EU: Provisional agreement reached on carbon border adjustment mechanism

A summary of provisional agreement on carbon border adjustment mechanism

14 December 2022

Negotiators of the EU Council and EU Parliament on 13 December 2022, reached a provisional agreement on the carbon border adjustment mechanism.

Summary of provisional agreement

The EU carbon border adjustment mechanism would be gradually implemented. It would begin operating as of 1 October 2023 with a transitional phase, during which affected organizations/importers would only be required to fulfill reporting obligations.
The scope of the carbon border adjustment mechanism would cover imports of goods from six emissions-intensive sectors: electricity, iron and steel, cement, aluminum, fertilizers and hydrogen. A detailed list of covered products will become available later.
Before the end of the transitional period (i.e., before 2026), the carbon border adjustment mechanism would be reviewed to assess whether to extend the scope to other goods such as organic chemicals and polymers, with the intention that all goods covered by the EU emissions trading system would fall under the scope of carbon border adjustment mechanism by 2030.
The governance of the carbon border adjustment mechanism would now be more centralized, with the European Commission (EC) in charge of most of the tasks.

Next steps

This provisional deal is dependent on an agreement on the reform of the EU emissions trading system. The EU Council and EU Parliament will have to formally approve the agreement before the new law can take effect. The new law will take effect 20 days after its publication in the EU Official Journal.

Read a December 2022 report prepared by the KPMG member firm in the Netherlands

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