EU Carbon Border Prices with Positive “Externalities” on Global EAC Markets

The proposed EU Carbon Border Adjustment Mechanism (CBAM) is currently subject to the first reading by the Council of the EU after the European Parliament made amendments to the European Commission’s proposal during the summer. The amendments of the Parliament showed a clear desire to expand the Commission’s initial scope of the proposed CBAM to include also indirect emissions from electricity used in the production of goods covered by the CBAM. Thus, making a distinction between these indirect emissions and those attributed to the production of imported electricity. This can affect the set-up of Energy Attribute Certificate (EAC) markets affected by the implementation of CBAM. In particular, the reference to and application of Environmental Footprint methods under the proposed CBAM can give EAC markets a boom in countries with exporting goods affected by the EU’s carbon border adjustment price.