1. Carbon Border Adjustment Mechanism
The CBAM was implemented in its transitional phase on October 1, 2023, with the initial reporting period for importers concluding on January 31, 2024.
Addressing the global challenge of climate change necessitates global solutions. With the EU elevating its climate ambitions, there arises a concern about potential ‘carbon leakage’ due to less stringent climate policies in many non-EU countries. Carbon leakage occurs when EU-based companies shift carbon-intensive production to regions with laxer climate policies or when more carbon-intensive imports replace EU products.
To tackle this issue, the EU has introduced the Carbon Border Adjustment Mechanism (CBAM), a pivotal tool that places a fair price on the carbon emissions associated with the production of carbon-intensive goods entering the EU. The CBAM aims to incentivize cleaner industrial production in non-EU countries. The gradual implementation of the CBAM aligns with the phasing out of free allowances under the EU Emissions Trading System (ETS) to support the decarbonization of EU industry.
Initially applying to specific goods like cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen, the CBAM will eventually encompass over 50% of emissions in ETS-covered sectors when fully phased in. The transitional period acts as a pilot phase to gather valuable insights and refine the methodology for the definitive period, involving stakeholders such as importers, producers, and authorities in the learning process.
2. Council Of The European Union Adopts ReFuelEU Regulations
The objective is to boost both the demand for and supply of sustainable aviation fuel (SAF) within the European Union.
On October 9, the Council of the European Union officially endorsed regulations pertaining to the ReFuelEU initiative. This recently enacted legislation is designed to enhance both the demand and supply of sustainable aviation fuel (SAF) within the European Union. The initiative’s development has spanned over a year, with Members of the European Parliament (MEPs) adopting draft rules for ReFuelEU in July 2022. A political consensus on the proposal was achieved by the European Parliament in April 2023, followed by MEPs approving the ReFuelEU regulations on September 13.
Following the formal adoption of the ReFuelEU initiative by the Council of the European Union, the newly approved regulations are poised to be published in the EU’s official journal in the upcoming weeks. These regulations will come into force on the twentieth day post-publication, initiating on January 1, 2024.
A key component of the Fit for 55 package, ReFuelEU aligns with the European Union’s overarching objective to curtail greenhouse gas (GHG) emissions by a minimum of 55 percent by 2030, relative to a 1990 baseline, and attain net-zero emissions by 2050.
Under the newly established ReFuelEU aviation rules, EU airports and fuel suppliers are mandated to ensure that a minimum of 2 percent of aviation fuels are “green” by 2025. This requirement escalates to 6 percent in 2030, 20 percent in 2035, 34 percent in 2040, 42 percent in 2045, and 70 percent in 2050. Additionally, the rules stipulate that a proportion of the fuel mix must comprise synthetic fuels, such as e-kerosene, with the synthetic fuel requirement set at 1.2 percent in 2030, 2 percent in 2032, 5 percent in 2035, progressively reaching 35 percent in 2050.
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- Source: https://climatetrade.com/2024-transport-legislations-supporting-supply-chain-decarbonization/
