Environmental Defense Fund, Incorporated
EDF
Environmental Defense Fund’s mission is to preserve the natural systems on which all life depends.
ID: 055600221526-33
Lobbying Activity
Response to Carbon Border Adjustment Mechanism
31 Mar 2020
Environmental Defense Fund (EDF) applauds the European Commission's efforts towards climate neutrality.
EDF encourages Europe to leverage its single market to encourage more ambitious global climate ambition and a more pro-climate interpretation of WTO rules. Because of the strength of the EU single market as an export market, border carbon adjustments (BCAs) would encourage GHG emission pricing in EU trading partners and give the EU an additional lever for increasing other countries’ ambition on climate.
Based on the economics literature (Cosbey et al, 2019) and experience, EDF recommends a narrow sectoral coverage of the BCA mechanism focused on energy intensive trade exposed sectors, and including natural gas.
The BCA mechanism is an alternative to the EU’s current free allocation of allowances to address carbon leakage in the ETS. EDF recommends forthcoming impact analysis to include:
- assessment of the different options for addressing carbon leakage such as free allowances, BCAs or a combination of both (e.g., using free allowances for products destined for exports);
- the distributional impact and environmental benefits of the increased public revenues from the removal of free allocation combined with increased prices on both domestic and foreign produced goods in the affected sectors.
BCAs can have a distributional effect across countries. To focus on the environmental motivation for a BCA mechanism, and to ensure it is not seen as punitive toward developing economies, EDF recommends the impact analysis review potential effects of earmarking BCA revenues to climate and energy related purposes, with most of the funds used to support developing countries affected by the BCAs. One potential mechanism for such transfers would be to use the revenues to pay for high quality Internationally Traded Mitigation Outcomes (ITMOs) under Article 6 of the Paris Agreement. Financing ITMOs will ensure the BCA revenues are used towards additional verifiable emission reductions.
EDF recommends BCAs based on existing sectoral carbon footprint benchmarks.
The BCA mechanism may allow for credits on imports for GHG prices paid in the origin country. Correspondingly, the BCA mechanism could also allow for a credit on exported goods destined to export markets without equivalent climate policies (equivalent to current free allowances under EU ETS but now only for exported goods).
EDF also wants to emphasise the importance of leveraging the Union’s market position as the world’s largest gas importer to addressing methane emissions from the EU’s natural gas supply chain, including from imports. Best available data suggests that the largest share of the EU’s methane footprint from natural gas are upstream emissions in the supply chain for natural gas imported to the EU. To reduce this footprint, the EU should adopt a mandatory performance standard for all gas sold in the EU market, including from imports, of maximum 0.20% upstream methane intensity by 2025.
For natural gas, EDF recommends the EU consider applying a methane emission price on both imported and domestically produced gas with the following no-regret features in the early phase:
- use the IPCC Tier 1 emission factors for natural gas systems (using the 2019 Refinement to the 2006 IPCC Guidelines) to establish default methane emission intensity estimates per unit of natural gas;
- allow producers a proportional reduction on the level of the methane payment on their gas if they provide certified, credible, third-party verified data on emission intensity representative of all their production facilities, with the underlying calculations made public;
- grant credits towards EU methane emissions payments for any emissions price already paid in the production country on the condition that such payments can be verified in fiscal registries and are based on third-party verified and appropriately sampled measurements of methane emissions per above.
Read full responseMeeting with Jos Delbeke (Director-General Climate Action)
21 Jun 2016 · Global carbon pricing