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Open and fair markets are a shared objective across the Atlantic, promised European Commission competition chief Margrethe Vestager in a speech last month to the US Chamber of Commerce. I sense there is a strong convergence in the concerns we share. Vestagers optimistic comments shed a light on the numerous developments in the transatlantic antitrust space over the past year that have the potential to be far-reaching. And while approaches to enforcement may differ, officials on both sides of the ocean clearly agree its time to rein in Big Tech.

In the United States, the Biden administration has targeted Big Tech with a renewed emphasis on enforcement of current antitrust rules, while Congress has introduced several potentially significant antitrust reform bills aimed at providing enforcers with an updated toolkit for dealing with the challenges posed by the digital economy. In the European Union (EU), much of the focus has been on the landmark Digital Markets Act (DMA), which is meant to create fairer and more competitive digital markets by setting ex ante ground rules for the worlds largest tech companies.

As both sides seek to address difficult questions swirling around some of the worlds biggest companies, 2022 is shaping up to be another busy year for transatlantic tech antitrust regulation.

In Europe, most of the early attention will be on trilogues, where the European Parliament (EP), European Council (Council), and the European Commission will attempt to reach an agreement on the final text of the DMA.

While they broadly agree on most of the legislative content, important issues remain to be settledfor example, on the definition of a gatekeeper within the context of the DMA. The proposal defines a gatekeeper as a company that operates a core platform service and possesses a significant and durable position on the EUs internal market. The strength of a companys position is determined by its revenue or market capitalization; whether the durability requirement has been satisfied depends on the number of years those thresholds have been met. Compared to the Council, the EP wants to increase the quantitative thresholds for individual companies, as well as expand the DMAs exhaustive list of core platform services. It remains to be seen how quickly the parties can come to an agreement on these and other outstanding issues.

Now that it holds the EUs rotating presidency, France will be in charge of driving the trilogues toward consensus. Adding both a wrinkle and urgency to these negotiations is the fact that France will also hold a presidential election in April, meaning that officials will try to move quickly to reach a deal on the DMA, at least in part for domestic political reasons. Vestager expressed her own sense of urgency, saying late last year that its better to pass 80 percent now than 100 percent never. Foot-dragging runs the risk that corporate lobbying may upend key provisions of the draft legislation, or succeed in scrapping it altogether.

In fact, a potential compromise could be that a skinnier version of the DMA is agreed to, with the aim of bolstering relevant provisions post-adoptionsimilar to what was intended with the ePrivacy regulation with respect to the General Data Protection Regulation. And just as they did with the ePrivacy regulation, lobbyists from various sectors will undoubtedly target the DMA during the trilogues. That said, it would be very surprising if the DMA fails to pass during the first half of this year.

In the United States, the picture of what to expect is less clear. Despite a strong desire in the White House and various agencies to better enforce current antitrust rules, the ability of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to effect substantial change on their own is fairly limited, due to legal and institutional constraints. On the legislative front, its unclear what, if anything, will happen, especially since 2022 is also an election year in the United States.

Nevertheless, to understand what lies ahead for transatlantic digital competition, its important to understand the different antitrust frameworks that underpin the larger debate in the EU and United States.

While there is a fair amount of overlap in the antitrust approaches of the United States and the European Union, there are also significant differences. To understand these differences, it is helpful to distinguish between substantive (legal) and institutional issuesand to recognize the diverging ideas about the role of government in antitrust enforcement that underpin the entire enterprise.

As far as the substantive antitrust rules, there is broad overlap. For example, authorities on both sides of the Atlantic tend to fall in line with one another when evaluating proposed mergers. If something is deemed unacceptable commercial behavior in the United States, it is generally also considered out of bounds in Europe (and vice versa). But when it comes to single-firm conductparticularly relevant in the context of Big Techthere are notable differences. Historically, the EU Commission and some EU member states have been much more aggressive in finding abuse of dominance than the DOJ or the FTC in their pursuit of unlawful monopolizations, likely because the market-share thresholds required to establish dominance under EU law are significantly lower than under US law. And once a company is found to have a dominant position, the European Court of Justice has held that it has a special responsibility to preserve competition in that market. No similar obligation exits in the United States.

The biggest difference, however, is the way in which individual cases are examined and adjudicated. In the United States, federal antitrust enforcers at the DOJ and the FTC lack the authority to decide cases independently. If, after an investigation, the DOJ determines that there has been an antitrust violation, its only option is to bring a civil lawsuit against the offending party in federal district court. In addition to going to district court, the FTC also has the option of pursuing the matter before an administrative law judge; but in either case, the FTC, like the DOJ, merely acts as a prosecutor.

In the European Union, the entire processfrom initial investigation through final adjudication, including the imposition of sometimes heavy finesis conducted by and within the EU Commission. This setup has led some in the United States to raise concerns about due process. While the Commissions powers are more far-reaching than those enjoyed by either the DOJ or the FTC, any concerns about a lack of due process are, according to EU law experts, misplaced. Besides reflecting the administrative-type enforcement systems found in most EU member states, its simply an example of how legal systems on continental Europe differ from that of the United States. Also, any party that gets an adverse decision from the Commission has an absolute right of appeal to EU courts.

The DMA would allow EU competition enforcers to regulate the behavior of dominant digital platforms (the aforementioned gatekeepers) ex ante, meaning it would allow them to set general guidelines for what those companies can or cannot do rather than rely on ex post competition enforcement (which is what the current rules allow). This would require companies that satisfy the gatekeeper definition to follow a list of guidelines or incur penalties for non-compliance.

The question of what can be done in the United States is more complicated than in the EU. In addition to US antitrust authorities being institutionally more limited than their EU counterparts in their enforcement actions, US antitrust law (and its enforcement) is controlled by the consumer welfare standardwhich means it focuses almost exclusively on whether alleged anti-competitive behavior harms the interests of consumers. The focus of EU competition law is much broader, and therefore as a baseline proposition allows for greater flexibility in exploring novel approaches to new challenges. The bills currently pending in Congress would tread new ground, but if consumer harm remains the sole legal standard, the focus of US antitrust law would remain the same.

In sum, there is a strong desire to curb the market power of Big Tech on both sides of the Atlantic. Given the EUs comparatively advanced legislative progress, together with the political imperative of getting something done, its highly likely the DMA will be passed this yearthereby strengthening the EU Commissions ability to constrain the alleged anticompetitive behavior of the largest tech companies. But the fate of the various bills pending before the US Congress remains an open question. The year ahead will be revealing about whether shared transatlantic values on Big Tech lead to shared policy.

Morten Skroejer is a nonresident senior fellow at the Atlantic Council and former counselor to Denmarks ambassador to the United States.

Nicole Lawler is a former Young Global Professional at the Atlantic Council.

Wed, Dec 8, 2021

GeoTech CuesByMathew Burrows, Julian Mueller-Kaler, Kaisa Oksanen, and Ossi Piironen

With no sign of Beijing backing down, the US administration lays out a strategy for restructuring NATO to be targeted on Russia and China, combining its allies from Asia and Europe into an enlarged, redefined alliance.

Mon, Jan 10, 2022

New AtlanticistByKatherine Walla

This year will remain a year of very constrained supply chains, Intel CEO Patrick Gelsinger said at the Atlantic Council, and we expect the shortages to continue into 2023.

Image: EU Commission Executive Vice-President Margrethe Vestager walks during a debate on the Digital Markets Act (DMA) at the European Parliament in Strasbourg, France December 14, 2021. Photo by Jean-Francois Badias/Pool via Reuters.

Continued here:
Can the US and EU rein in Big Tech with diverging approaches? - Atlantic Council

The European Union needs a new collective security pact to deal with NATO and Russia, French President Emmanuel Macron said on Wednesday.

"Europe today is confronted with escalating tension on our borders," Macron said in a speech at the European Parliament in Strasbourg.

"As Europeans, we need to collectively make our own demands and put ourselves in a position to enforce them," he added.

France took over the presidency of the Council of the European Union at the start of the year.

The French proposal intends to "create together a European power of the future ... an independent Europe that has given itself the means to decide its own future and not rely on the decisions of other major powers," he said.

France intends to create a new "security framework" during the presidency. "We need to build it between us, Europeans, share it with our allies in NATO, and propose it for negotiation to Russia," Macron said.

The EU was not directly involved in talks with Moscow over a possible Russian invasion of Ukraine as tens of thousands of Russian troops amass on the country's border.

Katarina Barley, a vice president of the European Parliament and a member of Germany's Social Democrats, told DW that the EU "does not have an original competence in foreign policy."

"We are actually a group of 27 member states and their interests, who unite to have a common foreign policy. And that is a weakness at times because reactions are sometimes not as quick and as firm as a single member state can give them," she said.

"But, on the other hand," she said, "we have such a variety of historical experiences, of networks, that we should turn this into our strength and be, as a European Union, one of the forces that really contributes to dialogue, and to search a solution for this conflict that is actually in a very crucial phase at the moment."

The European Union has been threatening "severe consequences" should Russia invade Ukraine. However, these consequences have not been laid out.

"There are discussions about reacting at the level of the SWIFT accord, which is the question of Russia being part of the international banking system. Imagine if Russian companies, the Russian government, Russian oligarchs would not be able anymore to exchange their money with other states," Barley said. "That would be a huge impact on the Russian economy. And this, for example, is a threat but is on the table."

Looking inward, Macron told lawmakers that France would push to include the right to abortion and defense of the environment in the EU's Charter of Fundamental Rights.

"Let us open up this debate freely with our fellow citizens ... to breathe new life into the pillar of law that forges this Europe of strong values," he said.

It comes just a day after the parliament elected Malta's Roberta Metsola, a staunch abortion opponent, as its president.

Macron said the European Unionneeded to "move from words to deeds, transforming our industries in investing in new technologies" to prevent climate change.

France plans to forge a new EU alliance with African countries. Macron said he would host an EU-African Union summit for that purpose next month.

"We can't just look at the subject of migration without looking at the deep-rooted causes and see that we have a common destiny with the African continent. We want our African friends to allow us to help them," Macron said.

He also touched on the bloc's relationship with the United Kingdom in the post-Brexit era.

"Nothing will call into question the bond of friendship which connects us to our British friends," he said.

He, however, insisted that the United Kingdom stick to the Brexit agreement, especially regarding fishing and the Northern Ireland protocol.

Macron faces an election challenge, with polls scheduled for April 10 and 24.

France's EU presidency comes at a beneficial time for Macron politically, as it is a chance for him to showcase France as a European power.

Macron is expected to formally announce his reelection bid in February.

Some French lawmakers suggested that Macron used his remarks on Wednesday to promote his candidacy rather than EU issues.

French Greens lawmaker Yannick Jadot, who is running in France's presidential election, told Macron: "You undoubtedly made a nice speech ... except you have been presiding over France for five years. You must be held accountable," Jadot said. "You will go down in history as the president of climate inaction."

Jordan Bardella,an EU lawmaker andmember of French presidential candidate Marine Le Pen's far-right National Rally party, also criticized Macron:"The presidential election will decide the future of France, but also the future of the whole Europe. How can you claim you'll bring Europe together when you have been until the end the one widening divisions in France?''

Stephane Sejourne, an EU lawmaker from Macron's party, said: "What a shame to transform [the European Parliament] into the [French]National Assembly."

fb, lo/rc (AFP, Reuters)

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Macron proposes security pact to make Europe a 'power of the future' - DW (English)

Eva Kaili was elected as a Vice President of the European Parliament on Tuesday. Credit: Facebook/Eva Kaili

Two Greek lawmakers were elected Vice Presidents of the European Parliament in a vote that took place on Tuesday.

Eva Kaili, of the Movement for Change (KINAL) party, was elected for the first time to this prestigious post and will join Dimitris Papadimoulis of SYRIZA, who was re-elected for the same post.

The European Parliament, which has 14 vice-presidents, is one of three legislative branches of the European Union and one of its seven institutions. Together with the Council of the European Union, it adopts European legislation, commonly on the proposals of the European Commission. The Parliament is composed of 705 members.

Kaili, who sits with the Progressive Alliance of Socialists and Democrats group, received 454 votes, coming fifth out of nine candidates, was thus elected to the position in the first round.

Nikos Androulakis, the leader of KINAL/PASOK, tweeted his congratulations to Kaili, saying it was the first time since 2014 that an elected member from their party had held the position.

Kaili is a former television news presenter who has been serving as a Member of the European Parliament since 2014. She was one of the Women who Shape Brussels and the Tech MEPs gang as the leading MEPs addressing the digital revolution according to Politico Europe in 2018.

In the 2004 national elections, she was the youngest candidate standing. In the 2007 national elections, she was elected as a member of the Hellenic Parliament for the first district of Thessaloniki. At the time, she was the youngest Member of Parliament with the PASOK party. She retained her seat in the 2009 national elections until 2012.

Papadimoulis, whose candidacy was proposed by The Left group of MEPs, got 492 votes out of 658. Papadimoulis, 66, has been an MEP since July 2014 and also served between 2004-9. He was a deputy to the Greek Parliament from 2009-14.

I warmly thank the MEPs who honored me again with their confidence, with a large majority, from a wide political spectrum, Papadimoulis said.

I am particularly pleased because two of the 14 vice presidents are from Greece. I congratulate Eva Kaili for her election and I look forward to constructive cooperation for the good of our country. For the next 2.5 years, I will continue to represent in the Bureau of the European Parliament both the European Left and, of course, my homeland Greece. For a stronger European Parliament. For a more united, democratic, social and ecological Europe. With more transparency, democracy and solidarity and less inequality, he added.

Maltese center-right MEP Roberta Metsola was elected president of the European Parliament, after the untimely death of David Sassoli earlier in January.

Metsola won 458 votes in the first round of balloting, easily capturing the needed majority after the Parliaments major groups agreed ahead of time to back the 43-year-old politician.

With humbleness, I feel honored by this responsibility with which you are entrusting me, Metsola told MEPs in her inaugural speech from the presidents seat. I promise you that I will work and do my utmost to work on behalf of this Parliament and for the benefit of all EU citizens.

See original here:
Two Greeks Elected Vice-Presidents of the European Parliament - Greek Reporter

The spread of the coronavirus, COVID-19, continues to be a challenge for all states around the globe. The Member States of the European Union have experienced first-hand how deadly the risks of the virus can be and how important it is to be prepared and mitigate the risk of any type of emergency. Since the start of the pandemic in the first quarter of 2020, the European Union has been in close touch with all the international development partners to stem the spread of COVID-19, provide medical care, and mitigate the economic consequences of the pandemic. The European Union has helped communities at large in effective preparedness and disaster response to shocks -- be it economic, natural disasters, health pandemics, or man-made crises.

While COVID-19 keeps challenging all five countries of Central Asia at an unprecedented scale, through existing programs, the European Union supports both resilient and sustainable political and economic frameworks that can prepare governments for future emergencies. One such programs of the European Union is the action for Strengthening Financial Resilience and Accelerating Risk Reduction in Central Asia (EU Central Asia Initiative), which started its implementation in July 2019. The indicative span of the Initiative is almost 4 years with the overall objective to strengthen Central Asian countries' resilience to disasters and climate risks by enhancing financial resilience, risk identification capacity, and improved risk management. Even though the Initiative strongly contributes to the implementation of the Sendai Framework for Disaster Risk Reduction 2015-2030 and supports Central Asia's efforts in achieving selected Sustainable Development Goals, when COVID-19 hit Central Asian countries -- Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan -- it was decided to expand the scope and integrate risk of health emergencies more prominently into the original framework of the program.

The EU Central Asia Initiative is divided into two result areas. In collaboration with a number of partners, the United Nations Office for Disaster Risk Reduction (UNDRR) supports the countries of the Central Asia region to build resilience and disaster risk reduction (DRR) through one of the result areas of the Initiative. This result area builds the foundation for greater resilience in Central Asia through data, capacity, governance, and cooperation at regional, national and local levels. The European Union also appointed the World Bank under the management of the Global Facility for Disaster Reduction and Recovery (GFDRR) to implement a second result area focussed on strengthening the evidence and capacity for financial resilience and risk reduction at national and regional levels in Central Asia. Both result areas are implemented in close collaboration with the Almaty-based Centre for Emergency Situations and Disaster Risk Reduction (CESDRR).

The global shock of the COVID-19 pandemic and its disastrous socio-economic impacts have underlined the importance of foreseeing new emerging risks, having solid disaster risk management and disaster risk finance strategies in place, better preparing for mitigating their impact and for reconstructing with better capacities and higher resilience. Beneficiaries still pay great attention to natural hazards and most of the work under the EU *Central Asia Initiative *can be applied to responding to health or pandemic crises.

The International Disaster Database, EM-DAT[1], reports that since the start of 2020, more than 113,000 people in Central Asia were affected by different types of disasters. Climate change is exacerbating the intensity of disasters and the COVID-19 crisis worsens the impact on the communities, especially the most vulnerable and the poor. One of the main side-effects of the COVID-19 pandemic is that it has further deepened existing vulnerabilities and challenges in terms of disaster and risk management. This shows that governments and societies need to better understand risks to manage them, especially when looking at how they can cascade or multiply with unexpected and potentially severe consequences. This aspect is vital to the countries of Central Asia, where often one hazard rapidly leads to another, making disaster management an even more urgent matter.

Thus, as a response to the pandemic through the EU *Central Asia Initiative, *UNDRR has already contributed to reducing disaster risk especially at the national level by training many national technical officers in DRR, collecting, and managing disaster loss information, and building resilience at the local level. The EU *Central Asia Initiative *is implemented by the UNDRR in collaboration with a number of partners, including the Center for Emergency Situations and Disaster Risk Reduction, (CESDRR), CIMA Foundation, Asian Disaster Preparedness Center (ADPC) and the International Federation of Red Cross and Red Crescent (IFRC). It is carried out in each country of the region and the activities are adapted to the unique disaster risk background.

As all countries seek to recover from the pandemic, UNDRR continues to support capacity building activities of national and local partners in Central Asia, building in a transformational approach to DRR. The COVID-19 pandemic and growing climate change impacts have demonstrated the need for reassessing the approach in DRR across the countries. There is a need to increase resilience at all levels and sectors, with strategies to address a large range of hazards and socio-economic factors. Furthermore, strengthened dialogue between Central Asian states continues to support closer cooperation in the region to better prepare for the cascading impacts of the pandemic and to reduce existing and future risks.

In support of strengthening DRR dialogue, a Member State dialogue brought together National Emergency Management Organizations, Ministries of Health, Sendai Focal Points, International Health Regulations Focal Points, emergency response and risk reduction entities, representatives of the European Union and United Nations system organizations in September 2020. The discussion analysed best practices learnt from the ongoing COVID-19 response, the potential for cascading effects, and effective measures to recover and build back better. Together with on-going activities under the EU *Central Asia Initiative, *there is a new momentum in the region to increase action on DRR and resilience and to work collectively to overcome this crisis.

Focusing on a transformative approach to DRR in the face of the ongoing pandemic, the governments of Central Asia countries resolved to develop and strengthen coordination on DRR at a sub-regional level. The Forum of Heads of National Disaster Management Authorities convened in November 2021 to adopt the Regional DRR Strategy for 2022-2030 and the Roadmap for its implementation in 2022-2023. Preceded by a number of regional declarations and statements, the first-ever regional strategy for DRR in Central Asia aims to join efforts in strengthening the focus on transboundary hazards, including biological hazards and climate-related risks, improving investments in risk reduction, and enhancing preparedness for response. The Heads of NDMAs also adopted a draft Regional Risk Profile, which technical experts from the four countries will periodically update to reflect the changing risk landscape.

Through the global Making Cities Resilient initiative, known as MCR2030, UNDRR supports the five capital cities of the region to build disaster resilience with a special focus on health systems in the current COVID-19 context, and in line with priorities of the Socio-Economic Response and Recovery Plans at country level. This is especially important at a time when across the region, every single country is facing a real threat of COVID-19 resurgence, or already fighting it. COVID-19 has challenged health systems in particular and demonstrated the need for a whole-of-government approach that leverages the capacities of all relevant departments, with local government bodies responsible for disaster risk playing a crucial role. Thus, a number of Central Asian capital cities have taken significant steps forward in strengthening city resilience. Following the establishment of technical working groups, the cities undertook initial resilience assessments using Preliminary and Health System Resilience Scorecards to support the strategic development processes at the local level. The emphasis of the Health Systems Disaster Resilience Scorecard Assessment is on facilitating multi-sectoral approaches to integrating health issues in disaster risk reduction/resilience planning at the city level.

The World Bank and GFDRR, as part of the COVID-19 response within the Initiative, provides technical assistance to selected countries in the region -- Kyrgyz Republic, Tajikistan, and Uzbekistan - to develop a more effective preparedness and disaster response by strengthening the social protection system and its flexibility to scale up in response to different types of shocks. Activities focus on defining a framework for scaling up the social protection system in case of a disaster or other emergencies affecting the livelihoods of large groups of people in the country. The work relies on the ongoing dialogue on social protection delivery systems in the countries as well as on ongoing World Bank projects under implementation. Country-specific outputs will include institutional and operational assessments of the social protection delivery systems and a proposed scaled-up road map to set up to address future disasters or other shocks for each country's social assistance system. This technical assistance is linking social protection systems with disaster risk management systems in respective countries, providing capacity building for staff in the use of designed tools, improving understanding of the linkages between social protection and disaster response among key stakeholders.

As the COVID-19 crisis puts Central Asia's resilience to the test, under the EU Central Asia Initiative, leaders take this opportunity to re-evaluate the current governance and policies to improve the region's ability to build stronger preparedness and response to such symmetrical shocks. The pandemic has not changed the fact that the region continues to face climate change, environmental challenges, and disaster risks of unprecedented urgency, but it certainly gave a lesson to prioritise the preparedness and prevention of the risks in the future.

See the article here:
The Central Asia Initiative of the European Union during the COVID-19 crisis: the way forward in preparing for and managing risks - Kazakhstan -...

The Draft Report sets out the Committees proposed amendments to the CBAM Proposal. While the Draft Report states that it welcomes the overall approach of the CBAM Proposal, several of the Committees amendments change some significant aspects of the CBAM Proposal.

In this publication, we will look at some of those interesting amendments and reflect on the impact they may have on the sectors concerned by the CBAM.

Climate change is a global problem that needs global solutions. Because the level of climate ambition varies throughout jurisdictions, a risk of carbon leakage exists. This means that companies based in the EU could move carbon-intensive production abroad, or EU products could be replaced by more carbon-intensive imports. Such carbon leakage can shift emissions outside of the EU and could therefore weaken climate efforts. Although the existing EU Emission Trading System (EU ETS) already provides protection against carbon leakage through free allocation of emission rights, the EUs ambitious Fit-for-55 targets have rendered this protection insufficient to protect sectors at risk. In order to increase protection against carbon leakage, the European Commission (EC) has therefore adopted a carbon border adjustment mechanism (CBAM). The aim of the CBAM is to equalise the price of carbon between domestic products and imports and ensure that the EUs climate objectives are not vitiated by production relocating to countries with less ambitious climate policies.4

In practice, under CBAM EU importers will need to buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EUs carbon pricing rules. Conversely, once a non-EU producer can show that they have already paid a price for the carbon used in the production of the imported goods in a third country, the EU importer will be able to fully deduct the corresponding cost. In short, the CBAM will help reduce the risk of carbon leakage by encouraging producers in non-EU countries to green their production processes.5 However, some difficulties concerning the principles and practical implementation of the CBAM still exist - these are discussed at length in this article on A&Os Countdown to COP26 blog.

CBAMs are already in place in some regions around the world, such as California, where an adjustment is applied to certain imports of electricity. Like the EU, a number of countries such as Canada and Japan are planning similar initiatives.6

Firstly, the Draft Report broadens the scope of the CBAM Proposal to cover organic chemicals, hydrogen and polymers by deleting the proposed Recital 32, which excluded the organic chemicals sector from the CBAM Proposal and adding a reference to hydrogen and polymers into the existing Recital 30 of the CBAM Proposal.7 This means the entire organic chemicals sector would also be subject to the CBAM, which is a significant extension of its scope.

Furthermore, the Committee extends the type of emissions covered by the CBAM Proposal by including indirect emissions (eg emissions generated from electricity used for manufacturing, heating or cooling) in the definition of embedded emissions in article 3, (16) of the CBAM Proposal.

In addition, the amendment not only covers the production processes of the goods themselves, but also those of its upstream products.8 This extension may have a significant knock-on effect, potentially involving additional (non-included) sectors in the proposed CBAM by association. It may also influence the carbon price (ie the amount paid in a third country in the form of a tax or emission allowances under a greenhouse gas emissions trading system, calculated on greenhouse gases covered by such a measure and released during the production of goods) seeing as embedded emissions in products imported into the EU will influence the amount of carbon certificates that will be required to import those products.

Additionally, the Committee notes that the implementation pace currently set out in the CBAM Proposal is too gradual to achieve the ambitious EU 2030 objective (ie the net emission reduction target of greenhouse gases of at least 55% by 2030, compared to 1990 levels)9. Therefore, it proposes to shorten the transitional period by one year, ending on 31 December 2024. The Committee also sets out an incremental phase-in of the CBAM factor as an alternative to the free allowances allocated under the EU ETS, so that it becomes compatible with the EU 2030 climate objective.10

The notable exception to this incremental phase-in is the cement sector, for which the Committee excludes certain categories of cement from this phase-in process entirely, because it considers this sector to be less exposed to carbon leakage. This means that the applicable CBAM factor for the cement sector will be 0% (meaning no CBAM mitigation factor would apply at all) from as early as 1 January 2025.

Moreover, the Committee considers that a central CBAM authority would be the most efficient, transparent and cost-effective instrument to ensure the proper implementation of the CBAM Proposal as opposed to a decentralised system with 27 competent national authorities. Practically, the Draft Report suggests that appeal against the decisions of the CBAM authority would be possible with an independent Board of Appeal, made up of three members, appointed by the Council, EP and Commission respectively.11 Decisions of the Board of Appeal could then be appealed with the General Court and ultimately, the Court of Justice.12 This begs the question, considering the caseload before the Court of Justice, whether these additional cases will not add significantly to the current processing times.

Interestingly, while the original article 26 of the CBAM Proposal contained a penalty provision in case declarants failed to surrender the required number of CBAM certificates amounting to the excess emissions penalty of article 16 (3) of the ETS Directive13 (ie EUR 100 for each tonne of carbon dioxide equivalent emitted for which the operator has not surrendered allowances), the amended article 26a changes the calculation method of the penalty to three times the average price of CBAM certificates in the previous year for each CBAM certificate that the authorised declarant did not surrender. Therefore, the Committees suggestion for article 26a allows the height of the penalty to fluctuate according to the price of CBAM certificates as opposed to a fixed penalty price depending on the excess amount of carbon dioxide emitted.

Overall, the Committees Draft Report contains some amendments that significantly extend the CBAM by including the organic chemicals sector in its scope, as well as including indirect emissions and emissions from upstream products into the definition of embedded emissions in the CBAM Proposal. These extensions of the CBAMs scope may have a significant knock-on effect on non-included sectors as well as the amount of carbon certificates declarants would be required to surrender.

Furthermore, the Committees indication that the current pace of implementation as set out in the CBAM Proposal is too slow seems characteristic of the EUs overall climate ambition as well as its desire to bring the CBAM in sync with the EU ETS and its free allocation rules. The ultimate objective is to ensure the CBAM becomes a fully developed alternative to the free allowances currently allocated to installations at risk of carbon leakage under the EU ETS. Nevertheless, the notable exception to this rule is the cement industry, which the Committee completely cuts out of these benefits, stating as justification that the cement sector has the lowest trade intensity among goods covered by the CBAM and the risk of carbon leakage is therefore correspondingly low. Indeed, certain categories of cement would not benefit from any CBAM factor from as early as 1 January 2025.

The Committees suggestions to change the approach toward authorisation of import of products into the single market under the CBAM from a Member State approach through competent national authorities to a single EU-level CBAM authority is remarkable as well. Considering that the import of goods happens at Member State level, one may suggest that national authorities could have a better view on the activities on the ground and the practical and logistical adoption of the future CBAM as opposed to a single authority managing the import goods at all entry points into the single market at once. That being said, an argument in favour of legal certainty and consistency while avoiding the risk of uneven implementation of the CBAM and its implementing measures and delegated acts across Member States and potentially, forum shopping, can also be made.

In addition, a potentially uneven implementation at Member State level could also result in trade distortions if certain national authorities would function more efficiently than others. It appears that the Committee has considered the latter view more convincing by introducing the idea of a single CBAM authority. Furthermore, the appeal process of CBAM authority decisions with an independent Board of Appeal and ultimately, the Court of Justice, does raise some questions concerning the current caseload before the Court and whether the development of the CBAM could be hindered by its relatively long processing times.

Finally, the Committee has also changed the CBAM Proposals approach toward the calculation of penalties. Instead of a fixed penalty per tonne of carbon dioxide emitted in excess of carbon certificates surrendered by a declarant, the penalty would now be calculated based on the price of the carbon certificates themselves. Depending on the price of the future carbon certificates, this penalty could be more burdensome than the initial approach set out by the Commission. However, it is still unclear at this point how the carbon certificates will be priced and how heavily those prices may fluctuate in the future.

In conclusion, although it is not certain that the Committees amendments will make it into the final CBAM Regulation, it is nevertheless interesting to see how the Committees vision differs on some significant points to that of the Commission. Seeing as the CBAM Proposal has been submitted under the ordinary legislative procedure, the amendments will be debated in the EP plenary, after which the EP will vote on the amended CBAM Proposal. If the EP adopts the (amended) CBAM Proposal, it will subsequently be sent to the Council, which can accept the EPs position (and thus, adopt the legislative act) or amend the EPs position and then send it back to the EP for a second reading. The vast majority of proposals are adopted during the first reading.14

If the CBAM Proposal fails to be adopted during the second reading by both the EP and the Council, a Conciliation Committee made up of members of the EP and Council representatives will attempt to reach an agreement on a joint text. If this is the case, the agreed text is sent around to the EP and the Council for a third reading. If both the EP and the Council approve the joint text, the CBAM Proposal will be adopted. If not, the CBAM Proposal will not enter into force and the procedure is ended. The average time for an EC proposal to be adopted on the first reading was just below 18 months in the 2014-2019 legislative period.15 Furthermore, certain Member States (eg France, which holds the presidency of the Council of the European Union since 1 January 2022 until 30 June 2022 and has flagged the adoption of the CBAM as a priority topic) are pushing towards its swift adoption, which may accelerate the legislative process. One thing is certain: this is not the last word on the CBAM Proposal.

1European Parliament, Committee on the Environment, Public Health and Food Safety, Draft Report on the proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism, 21 December 2021, available here (the Draft Report).

2Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism, 14 July 2021, available here (the CBAM Proposal).

3A&Os Countdown to COP26 blog already features a deep-dive analysis of the functioning of the CBAM, contributed by Arthur Sauzay. The full article is available here.

4European Commission, Carbon Border Adjustment Mechanism Q&A, 14 July 2021, see here.

5European Commission, Carbon Border Adjustment Mechanism Q&A, 14 July 2021, see here.

6European Commission, Carbon Border Adjustment Mechanism Q&A, 14 July 2021, see here.

7Draft Report, Amendment 13.

8Draft Report, Amendment 33.

9This target was adopted under the EU Climate Law. More information is available here.

10Draft Report, Amendment 105.

11Draft Report, Amendment 94.

12Draft Report, Amendment 96.

13Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas allowance trading within the Union and amending Directive 96/61/EC, available here.

14Source: see here.

15Source: here.

Read more:
The European Parliaments wish list on the Carbon Border Adjustment Mechanism (CBAM) - JD Supra