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On Tuesday, the Council of the European Union supported a “general approach” to advance a proposed EU carbon border adjustment mechanism (CBAM) to a vote in the European Parliament. The Council’s vote backs the proposed regulation’s framework, but leaves some details to further deliberation.

The Council of the European Union is an EU governing body that shares decision-making authority with the European Parliament. Both vote on, and can amend, legislation initiated by the EU’s executive branch, the European Commission. The Council consists of ministers from the 27 EU member states.

The European Commission proposed a CBAM regulation last year to apply a carbon price (or “adjustment”) on imports from non-EU countries lacking comparably stringent climate policies.

Since the EU’s climate policies, including its emission trading system (ETS), typically impose additional compliance costs upon domestic producers, the CBAM is regarded as necessary to avoid giving producers operating in foreign jurisdictions, but importing products into the EU, an unfair advantage due to lax environmental regulations.

The general approach adopted by the Council covers how the CBAM will apply to various industrial sectors, including iron, steel, aluminum, cement, fertilizers, and electricity. The European Parliament indicated in its draft report that it would also like the final rule to cover hydrogen, chemicals, plastics, and indirect emissions from other products.

The current Canadian and American governments have indicated they are actively considering options for imposing their own carbon border adjustments in the future, though it would appear everyone's watching to see how the EU’s approach plays out first.

Please contact our firm at 647-725-4308 or info@greeneconomylaw.com for legal assistance in connection with carbon pricing matters in Canada.