The European Parliament and the Council reach a preliminary agreement on a border carbon correction mechanism. There are fears that this could lead to lower fertilizer imports and higher fertilizer prices.
The Border Carbon Dioxide Adjustment Mechanism (BCA), as part of climate policy actions, is intended to encourage non-EU companies to import goods into the EU that meet the climate standards of the 27 EU countries. In fact, this means the transfer of production from EU countries to third countries with lower environmental requirements.
PADKM will initially cover some specific products in some of the most carbon-emitting sectors: iron and steel, cement, fertilizers, aluminium, electricity and hydrogen, as well as some precursors and a number of downstream products. Indirect emissions would also be included in the regulation.
Why is the mechanism called border adjustment?
Because the introduction of certain products across the EU border would be subject to additional taxation (help to offset production costs, e.g. as part of EU emissions trading).
Under the preliminary agreement, the PADKM would start in October 2023. Initially, the simplified PADKM would be implemented through reporting obligations. The aim is to collect data. It will be fully operational from 2026. It would be introduced in conjunction with the phasing out of free allowances.
The phasing out of free emission allowances for PADKM sectors has yet to be agreed upon in the ongoing EU ETS negotiations. Measures are also being developed to prevent carbon leakage in the area of exports. The agreement must be approved by the ambassadors of the EU member states and the European Parliament.
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