The European Union's Carbon Border Adjustment Mechanism (CBAM) through supply chain regulations and trade measures would be a game changer in tackling emissions, experts said.
The EU is set to introduce CBAM, which in effect will make use of trade policy in an unprecedented manner to tackle carbon emissions, they said.
Dr Mohammad Abdur Razzaque, Chairman of Research and Policy Integration for Development (RAPID), told the UNB that EU has been maintaining an emission trading system (ETS) to reduce greenhouse gas emissions of high carbon-emitting sectors.
Carbon price under the EU-ETS reached a record high at EUR 98 per tonne of CO2 on 18 August 2022. Since then it has somewhat fallen and fluctuates around EUR 70, which will be effective in trade in the EU market after 2026, he said.
Dr Razzaque, also an international trade expert, said embedded carbon content in imports will be priced equivalent to the price of CO2 faced by EU domestic firms under ETS.
The transition phase is 2023-2025 -in this period importers will have to report emissions embedded in their goods without paying any charge, he pointed out.
The EU government and EU parliament is working on such regulation to bring about execution by 2026, which may be shifted to 2027. Once in operation, the importers will have to pay for embedded emissions, buying CBAM certificates, Dr Razzaque said. If a non-EU exporter establishes a carbon market, the corresponding cost will be deducted from total CBAM charges, he said.
According to the European Commission, the CBAM will initially apply only to a select number of goods at a high risk of carbon leakage, viz., cement, iron and steel, aluminum, fertilizers, and electricity, and will be operational from January 2023, said Md Jillur Rahman, Assistant Professor, Economics Department, Jagannath University.
He said both the European Council and Parliament have adopted their positions on the Commission's proposal for a CBAM. "The European Parliament proposes a gradual implementation of the CBAM beginning in 2027, and full implementation beginning in 2032 when the free allowances will be completely phased out," Jillur said.
The European Parliament proposes to broaden the scope of sectoral coverage to include organic chemicals, plastics, hydrogen, and ammonia. Gradually the coverage should be extended to cover all sectors, he said.
Jillur said, the European Parliament, Council, and Commission will now engage in a trialogue (three-way dialogue) and discuss the differing viewpoints of the three institutions. The political process may be completed by the end of 2022 to adopt the final CBAM regulation for the Union.
Professor Abu Eusuf of the department of development studies, Dhaka University, said many countries, including India, Vietnam, and China are taking measures to reduce carbon emissions to address the negative impact of climate change in line with the Paris Agreement. Prof Eusuf said that subject to technology and know-how transfer, and finance and investment support from the international community, Bangladesh intends to reduce GHS emissions by an additional 15.12 percent (61.9 MtCO2e). -UNB
