Carbon Market Watch fully supports efforts to price GHG emissions, within and outside the EU. The EU ETS has been successful for certain sectors, but has failed to incentivise large scale decarbonisation of European industry, in part because of its excessive measures to guard against the hypothetical risk of carbon leakage. Industrial companies have gained billions of euros in windfall profits from the EU ETS, due to the free allocation of allowances, despite the fact that there has never been – and it is unlikely there will ever be – any significant risk of carbon leakage from the EU ETS.
Given this, neither the free allocation of allowances nor a carbon border adjustment mechanism (CBAM) are necessary tools for climate action. However, a CBAM is preferable to free allocation as a CBAM ensures that polluters pay for their emissions. The European Commission should also consider alternative policy options in its impact assessment including the implementation of carbon emission performance standards for energy-intensive materials and creating markets for zero-carbon solutions through public procurement. […]
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