More than just acronyms – CBAM and ETS, what do they mean for decarbonising the transport sector?
The Council of the EU recently gave its final seal of approval to both the EU Emissions Trading System II (ETS II) and Carbon Border Adjustment Mechanism (CBAM) files, following the European Parliament’s sign-off a week earlier. But what does this mean for the European auto industry?
EU Emissions Trading System II (ETS II) for road transport
ACEA supports the inclusion of road transport in the new EU Emissions Trading System (ETS II). If the carbon content of all energy carriers is priced appropriately, transport operators will be encouraged to swiftly transition to zero-emission vehicles. As such, the ETS II is a crucial cornerstone for the European road transport sector’s actions to achieve its fossil-free ambitions by 2040.
Nevertheless, a carbon pricing system must form part of a broader enabling framework, including an expanded and accessible network of charging and refuelling infrastructure. Revenues from ETS II should be re-invested in the road sector to facilitate the net-zero emissions transition and mitigate negative impacts. If implemented wisely, ETS II could serve as an excellent example of where different EU policies can work holistically to achieve this transition.
Carbon Border Adjustment Mechanism (CBAM)
While Europe has some of the most stringent emissions legislation globally, it cannot act alone. The long-awaited CBAM seeks to balance decarbonisation costs related to the production of certain materials between the EU and third countries. Many of these materials are critically important for the auto industry eg steel and aluminium. The initiative seeks to minimise the risks of carbon leakage at a critical juncture where both the United States and China are raising the stakes in attracting industry investment.
As a longstanding industry with an industrial base firmly rooted in Europe, the sector accounts for almost 200 manufacturing plants and supports 12.7 million well-paid and stable European jobs. For auto makers, CBAM will increase costs by raising the price of imported materials. Costs are also set to increase further in the next decade as CBAM is gradually expanded to include more materials and manufactured goods. On the other hand, CBAM could accelerate decarbonisation across the sector’s global supply chains and make it easier for auto makers to meet their sustainability goals.
At this early stage, a lot is still unknown, but the long-term effects on the competitiveness of European manufacturing will become more evident as global supply chains begin to feel the impact of CBAM.
Revenues from ETS II should be re-invested in the road sector to facilitate the net-zero emissions transition and mitigate negative impacts.