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INTA Debates the WTO and Carbon Border Adjustment Mechanism

Tensions have risen in the European Parliament Committee on International Trade (INTA) as members discussed upcoming reforms of the World Trade Organisation (WTO) and the Carbon Border Adjustment Mechanism (CBAM).

MEPs were in agreement that the General Agreement on Tariffs and Trade (GATT) be respected in the creation of a standard carbon price – in particular articles 1, 3 and 20. Committee members expressed that the CBAM should not be seen as an instrument for market interference, designed to burden SMEs or industries, but as a tool to address global climate change and increasing carbon emissions.

Understandably, many members are still concerned about the practical implications of a CBAM. Disagreements arose over whether a separate committee should form to specifically address and monitor carbon emissions, and whether or not this move was adding further bureaucracy to an already complex system. They discussed whether the EU was behaving in a “protectionist” manner, and that it must avoid isolationism. Members insisted that there must be a system that is coherent, and they questioned if it is even possible to adopt a global CO2 tax that is valid across the world – otherwise the EU would end up with a “competition distorting” measure. Additional concerns about financing, SMEs, smaller countries, exporting industrialisation just to import goods and service, and legal issues could all contribute to carbon leakage, and members stressed that this effort was not to be underestimated.

However, overall agreement of the INTA committee was that CBAM should align with the rules of the WTO and the Paris Agreement. Members believe that the the EU is embarking on a "ground-breaking" EU Green Deal, the likes of which no other country has attempted, and it should be the basis going forward. The CBAM is not an end in and of itself, but is an encouraging element to bring ambition back to EU industry and move towards technological improvements.

MEPS state that it will not be easy to convince major players – such as the U.S. or China – to adopt the same policies. However, they recognise that gaining WTO approval of the mechanism is an important step to reaching the EU’s climate targets. Members expressed concern that the WTO would see CBAM as another tariff, and regard it as an additional barrier to trade. MEPs stated that changing this mindset will require broad mobilisation in Europe to get approval, but it will ultimately be a huge deciding factor in whether or not the EU meets its Green Deal goals and do not fall prey to “green washed” trade policy.

ENVI rapporteur Yannick Jadot confirmed that there are a broad range of impact assessments ongoing that will be available by the end of the year. The public consultation for CBAM ended this week and legislation is expected to be adopted in the Q1 2021.

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