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As CBAM border carbon tax looms, EU wants to help Western Balkans adapt

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Businesses in the Western Balkans face the introduction of the European Union’s CBAM border carbon tax in 2026, but they must also start reporting their emissions in four months. The EU must help both governments and industrial producers adapt to changes and overcome the initial impact, according to officials who spoke at a workshop organized by the EU Secretariat. energy in Brussels.

The carbon border adjustment mechanism is just around the corner. Importers of electricity, aluminum, cement, fertilizers, hydrogen, iron and steel to the EU will be imposed a tax from 2026 for the greenhouse gas emissions created during production.

Their counterparts within the 27-member bloc already pay such a tax via the Emissions Trading System – EU ETS. He gives companies third countries such as the Western Balkans, an advantage that the EU intends to adjust through the CBAM. In a few months, the Brussels authorities should publish more detailed rules. In all cases, the exporters concerned are obliged from October 1 to measure and declare their emissions on a quarterly basis.

If third countries, including the Western Balkans, set up their own emissions trading systems, they will avoid the carbon tax at EU borders and keep the revenue for their own decarbonization projects.

Additionally, the EU is working on a framework to make CBAM equivalent to the EU ETS as the system expands to other sectors. If third countries introduce their own emissions trading schemes, the money they collect would be earmarked for national decarbonisation projects instead of going to the EU.

Governments in the region must quickly make up for lost time. The EU is aware that it must provide technical support and funds to implement the changes, according to officials who spoke at a workshop titled Making the Energy Community CBAM-Fit, held today in Brussels. Additionally, industry representatives offered suggestions at the event and voiced their concerns.

Responsibility lies with governments

The Energy Community Secretariat, which organized the meeting, will help contracting parties to align with the EU’s energy and climate acquis and fulfill exemption conditions, said the director of the Energy Community. organization, Artur Lorkowski.

Director of the Energy Community Secretariat, Artur Lorkowski, urged contracting parties to take a regionally coordinated approach to adapt to the CBAM.

“Let us not forget the fact that CBAM places responsibility primarily on commercial entities. Nevertheless, the power to cushion the impacts of CBAM and take full advantage of the exemption offered lies with governments,” he said. Lorkowski reiterated that the contracting parties would amplify the effectiveness of the necessary reforms through a coordinated approach at the regional level.

“Countries benefiting from a CBAM exemption for electricity must also establish an effective system to prevent the indirect importation of electricity into the Union from third countries that do not meet the exemption conditions. This is why, I believe, progress in electricity market coupling and the launch of an emissions trading system must be pursued in parallel and in a coordinated manner at Community level. “energy,” he stressed.

The Energy Community Ministerial Council is expected to provide guidance in June on the challenges ahead.

Knjeginjić from Lafarge: No construction without cement, without iron and without aluminum

Carbon dioxide emissions and CBAM are not yet a topic in the Western Balkans and the issue is not critical for any minister, said the CEO of Lafarge Serbia. Dimitrije Knjeginjić notified at the workshop. Earlier this month he also spoke at the Belgrade Energy Forum (BEF 2023) on the woes of the cement industry.

Knjeginjić requested financial and legislative support from the EU. “Someone has to produce cement. Someone has to produce iron, aluminum and all other materials because no building can be built without them,” he stressed.

Electricity consumption represents only 10% of cement manufacturer Lafarge Srbija’s emissions

The boss of the Serbian cement manufacturer explained that electricity only represents 10% of his company’s emissions. Calcium carbonate processing accounts for half of the CO2 and 32% comes from burning petroleum coke (petroleum coke) or coal, Knjeginjić added. He highlighted that the power sector has so far been the center of public attention regarding the introduction of CBAM.

Without help, nothing will happen, Knjeginjić said, estimating that 55% of the cement industry’s emissions could be addressed within a year, without any costs. Indeed, the rules need to be changed to facilitate the use of alternative fuels and the processing of construction waste to make recycled cement and concrete, he said.

Serbia still does not allow imports of alternative fuels

“We can reuse all the materials from demolition activities and the waste we generate when building new facilities,” said Knjeginjić, who called the circular economy a game-changer for the sector. But in Serbia in particular, it is not allowed to import alternative fuels, unlike in neighboring countries.

In the Western Balkans, no one would want to buy a cement plant because of CO2, said the CEO of Lafarge Serbia. Any alternative fuel is better than traditional fuel in terms of emissions, Knjeginjić said.

“It is much better to support those who are near than those who are far away. For what? Because if you support Bosnia or Serbia or Moldova, the distance to travel to buy the goods is much smaller than if you expect someone from China or India to pay the price of CO2,” he said. he declares.

CBAM is not a protectionist measure

Maria Elena Scoppio, Director of Indirect Taxation and Tax Administration at the European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD), said the reporting obligation is a repetition, a “learning by doing” process to familiarize companies with the scheme.

The reporting requirement that will come into force in October is a rehearsal, explained the EU’s top tax official, Maria Elena Scoppio.

“The CBAM is not a protectionist measure. This is not done to protect our industry. Our industries nevertheless pay. But it is about ensuring that at least on our territory, we have the possibility of using raw materials compatible with the environmental standards that we respect,” she believes. The new carbon border tax is a tripartite relationship between the European Commission, a company and a state, Scoppio said.

The European official went further by emphasizing that the new system is designed as an incentive. “A CBAM that works is a CBAM that dies, a CBAM that does not exist. Because we won’t need it anymore. Because all the products will be so compliant that we will all be on the same level,” Scoppio said.

The EU ETS must be completed, replaced

MEP Viola von Cramon-Taubadel believes that the EU’s emissions trading system has failed to facilitate the necessary reduction.

“The ETS has not been a sufficient incentive to effectively reduce emissions. It therefore does not work and the emissions trading system must be supplemented and replaced. This is why we are here. This is where the carbon border adjustment tax, CBAM, finally comes into play. This is a stop signal for those who wish to continue importing CO2-intensive products into our market, while alternative products, less CO2-intensive, are already available,” she stressed. .

Low-carbon practices would make Western Balkan industries more competitive in the EU market

The CBAM should encourage third countries to strengthen their climate policies, implement stricter emissions reduction targets and invest in renewable energy infrastructure, according to Von Cramon, who also acknowledged that the transition “must be supported by generous funding opportunities.” She expressed confidence that industries in the Western Balkans would become more competitive in the EU market by implementing low-carbon practices.

“We must study ways to close the 16 coal-fired power plants in the Western Balkans. It’s a bit difficult to talk about it when we in Germany have returned to coal,” Von Cramon added.


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