AQW 25559/17-22

Mr Declan McAleer
Sinn Féin
West Tyrone

Tabled Date: 10/11/2021
Answered On Date: 17/11/2021
Priority Written: Yes

Question:
To ask the Minister of Agriculture, Environment and Rural Affairs for his assessment of (i) the European Commission's regulation on carbon border adjustment mechanism as a means of addressing carbon leakage; and (ii) what this means for the protocol on Ireland/Northern Ireland.

Answer:

On 14 July 2021 the ‘Fit for 55’ package was launched by the EU Commission. Included in this package is a proposal for a new Carbon Border Adjustment Mechanism (CBAM) which will put a carbon price on imports of a targeted selection of products- cement, iron & steel, aluminium, fertiliser and electricity, which have been identified as being at high risk of carbon leakage. The effect of CBAM for the EU would be to equalise the price of carbon between domestic products and imports.

The EU has stated that the aim of CBAM is to ensure that EU emission reductions will contribute to a global emissions decline, rather than displacing carbon-intensive production outside Europe.

It is proposed that CBAM will be phased in gradually from 2023, and will be fully operational from 2026.

The EU has indicate that it considers CBAM to fall within the scope of the NI Protocol, however it is not clear how this should be applied. The potential for price divergence between the UK and EU carbon markets to trigger the imposition of the CBAM on the UK, including NI, is a matter for future negotiations between the UK Government and the EU. Under the terms of the Northern Ireland Protocol, NI electricity generating installations have remained in the EU Emissions Trading Scheme, resulting in a common carbon price across the all-island Single Electricity Market (SEM). These installations would therefore be exempt from any CBAM.