European Agenda

    The climate doesn’t care where the CO₂ comes from

    If companies leave the EU to avoid the execessive regulations to reduce CO₂ this could lead to a global rise in emissions. To avoid this the EU is trying to create a level playing field.

    If companies leave the EU to avoid the execessive regulations to reduce CO₂ this could lead to a global rise in emissions. To avoid this the EU is trying to create a level playing field.

    The same rules for everyone: The European Carbon Border Adjustment Mechanism

    EU Commission President Ursula von der Leyen already brought up the creation of a CO2 border adjustment measure as part of the "European Green Deal" in her first major speech to the European Parliament. The idea is to create a levy on selected imports to begin with, which cause emissions during their manufacture abroad but are subject to lower environmental standards than in the EU. This is intended to compensate for so-called carbon leakage (i.e., the relocation of economic activities due to comparatively high environmental requirements) and competitive disadvantages of European companies due to stricter CO2 requirements and higher prices for CO2 in a global comparison.

    This initiative is closely related to the pricing of carbon dioxide within the EU, which for some sectors has so far been regulated by the EU Emissions Trading Scheme and to some extent by the EU Energy Taxation Directive. There is discussion of extending this so-called CO2 pricing to more sectors and at the same time intensifying the price signal. A CO2 border adjustment measure would apply to imports to the EU.
    The aim of an adjustment mechanism at the EU's external borders would be to link climate protection with the preservation of competitiveness and thus to maintain the competitiveness of the European economy in the face of higher environmental standards in the EU.

    In line with the Paris climate goals

    The VDA is committed to the goals of the Paris Climate Agreement and to greenhouse gas-neutral transportation by 2050 at the latest. Achieving these goals will require enormous efforts on the part of industry and society. The Paris Agreement aims to achieve this on a global scale, because climate protection policy is a global problem that can only be solved jointly by the world community.

    The most important goal in climate protection policy must be the effective and, if possible, global implementation of climate protection targets. In addition to globally agreed emission targets, this would also include, for example, a globally uniform emissions trading system. This is a major challenge, but must nevertheless be and remain the goal of international climate protection policy. The EU can and should play a pioneering role internationally. However, if the other partners do not follow suit or if the EU is too stringent, this will lead to carbon leakage effects and distortions of competition to the detriment of industry in the EU. Against this background, it is proposed that the consequences of globally differing CO2 standards be offset by compensatory measures for goods in world trade. The German automotive industry is campaigning worldwide for the dismantling of trade barriers. A global level playing field is therefore crucial to avoid competitive disadvantages.

    Compatibility with the rules of the WTO

    The VDA has always advocated that trade policy should not be instrumentalized for other policy goals. At the same time, the VDA advocates a multilateral, rules-based framework for international trade and investment. All possible measures taken to avoid carbon and investment leakage, i.e., any trade or investment policy measure taken by the EU, must therefore ensure compatibility with the rules of the WTO and the trade agreements concluded internationally. Such a system should only be introduced in close consultation with all major trading partners. 

    A CO2 border adjustment mechanism is per se an extremely complex system with multiple interdependencies. For its successful implementation, it is crucial that the requirements are practicable for the companies concerned and at the same time legally secure.

    Mitja Schulz
    Contact person

    Mitja Schulz

    Head of Brussels office

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