POLITICO Pro Morning Trade: CBAM week

IT’S CBAM WEEK: The European Commission will this week publish the biggest legislative package it’s ever rolled out: Fit for 55. It’s a mammoth collection of policy measures aimed at allowing the EU to cut emissions by at least 55 percent by 2030. Massive changes are in store for everyone: people, businesses, governments.

Why you should care: The Commission is looking to revise 10 existing proposals, from emission standards for cars to new renewable energy and efficiency targets, as well as come up with a whole new levy for polluting imports and a social fund to shield poor and vulnerable households from rising fuel prices.

For trade, and especially trade relations with third countries, all eyes are on what the plans will say about a new carbon border levy, aka CBAM. The idea has already managed to rile big players in global trade, who could take legal action against Brussels at the World Trade Organization. Even within Europe — and within the European Commission — the measure has failed to win a large fan base. The big thing to watch out for is whether the Commission will succeed in proposing a levy that is in line with its goals and still is WTO compliant. Catch up on the carbon border levy discussion here

Advice on how to sell it: If Brussels wants its carbon border adjustment mechanism to be a success, it should step up efforts to “reassure its trading partners and make clear that CBAM will not result in the creation of a ‘rich club’, nor penalise the most vulnerable countries.” That’s the key message from a group of trade experts, including former WTO boss Pascal Lamy, in a paper published by the Europe Jacques Delors think tank last week.

Careful with exemptions: The paper calls on the EU to focus on what the authors call the “three Ds” (diplomacy, dialogue and design) and warns against the risk that exempting countries with “similar” CO2 pricing systems could be considered as discriminatory under WTO rules.