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The EU’s Carbon Border Adjustment Mechanism and the Energy Community: Threat for Electricity Trade or Tool for Raising Climate Ambition and Electricity Market Integration

Karova Rozeta


Upon proposal from the European Commission and endorsement by the Council of the European Union, the European Parliament is about to adopt a Regulation establishing a Carbon Border Adjustment Mechanism (CBAM) in order to address carbon leakage from some of the most carbon intensive sectors, including electricity. Unless a technical solution is found, such mechanism cannot be applied to electricity trade with countries that have electricity markets coupled with the EU, so the proposal contains provisions for exemption from its application under strict conditions. Electricity is traded at short distances, so such exemptions are in practice relevant for the Energy Community Contracting Parties which have electricity systems interconnected with the EU. This article argues that it would be in the interest of the Contracting Parties to step up efforts for completing electricity market integration and delivering on the decarbonisation agenda, including introduction of carbon pricing at national level in order to be exempted from CBAM, rather than to face its application.

The author is a Senior Energy Lawyer at the Energy Community Secretariat in Vienna, which she joined in 2011. The views presented in this paper are strictly personal views of the author and do not reflect the position of the Energy Community Secretariat.


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