Paris and Berlin are teaming up to press the European Commission for a new fix that keeps EU-made goods competitive as the region ramps up climate rules. The goal is to avoid production migrating out of Europe. As the draft text puts it, "The gradual increase in carbon costs for EU producers, if left uncompensated, risks undermining EU competitiveness in third-country markets and may lead to carbon leakage," the document says. "It therefore requires a European solution." The push is set to attract broad support, with Spain and Italy among those onside.
Over the coming decade, free emissions permits in the EU will be wound down, so heavy industry will bear rising costs for every ton of CO2 emitted. The EU is also implementing a carbon border levy so imports face comparable carbon costs. Even so, officials worry that European exports do not get the same level of protection when they head to markets abroad.
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This comes as EU countries and the European Parliament hash out changes to the Emissions Trading System that the Commission proposed in July. Climate ministers will debate the package in Luxembourg on Oct. 12, followed later that week by a meeting of leaders from the 27 member states in Brussels. Requests for comment did not receive prompt replies from spokespersons representing France and Germany.
So far, the response has been limited. In December last year, officials unveiled a temporary decarbonization fund that serves as a partial two years bridge. Other options have been shelved over worries they could breach World Trade Organization rules.
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