Resilient LLP (formerly DeMarco Allan LLP)
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Border Carbon Adjustment

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European Parliament Adopts ‘Fit for 55’ Legislative Package

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The European Parliament today approved the deals reached with EU member countries in late 2022 on several key pieces of legislation that are part of the “Fit for 55 in 2030 package”, the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law. The 27 EU countries are collectively the third largest emitter of GHGs globally. The legislation now requires final approval from EU member countries over the course of the next few weeks. This bulletin summarizes key highlights from the legislation adopted today: EU ETS strengthened. Members of the European Parliament (MEPs) voted to reform the EU Emissions Trading System (ETS), which will now require GHG emissions in covered sectors to be reduced by 62% by 2030 compared to 2005 levels. The reforms also phase out free allowances starting in 2026 and place a price on GHG emissions from road transport and buildings starting in 2027 or 2028 (termed ETS II).  Moreover, the ETS will be expanded to cover GHG emissions from the maritime sector, and revised for aviation, phasing out free allowances for the sector by 2026 and promoting the use of sustainable aviation fuels (SAF).  CBAM rules adopted. MEPs adopted the rules for the new EU Carbon Border Adjustment Mechanism (CBAM), which aims to incentivize non-EU countries to increase their climate ambition while ensuring that EU and global climate efforts are not undermined by carbon leakage (production being relocated from the EU to countries with less ambitious policies). The goods covered by CBAM are iron, steel, cement, aluminium, fertilizers, electricity, hydrogen, and indirect emissions under certain conditions. Importers of these goods would have to pay any price difference between the carbon price paid in the country of production and the price of carbon allowances in the EU…

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Canada Releases 2030 Emissions Reduction Plan

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Environment and Climate Change Canada (ECCC) today released the 2030 Emissions Reduction Plan (the Plan) under the Canadian Net-Zero Emissions Accountability Act (the Act; read our earlier bulletin on the Act here). The Plan sets out current actions, additional funding of $9.1B, and several new initiatives to meet Canada’s emissions reduction target of 40-45% below 2005 levels by 2030, as provided last year in an update to Canada’s Nationally Determined Contribution (NDC) under the Paris Agreement (read our earlier bulletin on Canada’s updated NDC targets here).   The Plan also sets a new interim objective of reducing GHGs by 20% below 2005 levels by 2026, noting that this interim objective is not an official target akin to Canada’s 2030 NDC, but that progress towards achieving the objective will be a cornerstone of progress reports associated with the Plan in 2023, 2025, and 2027.   This bulletin highlights key parts of the Plan and summarizes the newly announced funding and initiatives, across the following categories: Carbon pricing Clean fuels Clean growth funding Methane Buildings Electricity Heavy industry Oil and gas Transportation Agriculture Waste Nature-based solutions Clean technology and climate innovation Sustainable finance Jobs, skills, and communities Prime Minister Justin Trudeau launched the Plan in an address at the GLOBE Forum in Vancouver earlier today.  Carbon pricing. The Plan notes the measures undertaken to address economy-wide emissions including the federal fuel charge and the Output-Based Pricing System for industrial emitters under the Greenhouse Gas Pollution Pricing Act. Escalating the federal benchmark price to $170 by 2030 is meant to further support the 2030 targets of the federal government along with continued consultations on a possible border carbon adjustment (read our earlier bulletin here). Very significantly, the Plan puts forward the concept of investment approaches, like carbon contracts for differences, which enshrine future price levels in contracts between the federal government and low-carbon…

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U.S. Democrats Unveil Border Carbon Adjustment Legislation

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U.S. Senator Chris Coons and House Representative Scott Peters, both Democrats, earlier this week unveiled the “Fair, Affordable, Innovative, and Resilient (FAIR) Transition and Competition Act” (the Act), which, if enacted, would establish a border carbon adjustment (BCA) to be imposed as a fee on imports, starting on January 1, 2024. This follows the recent release of climate and emissions reduction proposals by the European Commission which also include BCAs for imports into the European Union. This bulletin briefly outlines the key provisions of the Act. Sectors. The Act would apply to industrial facilities that produce the following products: Steel; Aluminum; Cement; Iron; and Any product which is composed of over 50 percent of any of the above products. Determination of domestic environmental cost incurred. The Act would empower the Secretary of the Treasury (the Secretary) to annually determine the domestic environmental cost incurred for each sector or the average cost to produce a covered fuel (natural gas, petroleum, and coal), to comply with federal, state, regional, or local law, regulation, policy or program which, inter alia, is designed to limit or reduce greenhouse gas (GHG) emissions, including cap-and-trade systems, carbon taxes, and fees. Border carbon adjustment. The Secretary would administer the BCA through regulation and guidance. The Secretary of State and the United Stated Trade Representative would engage with other countries to reduce global GHG emissions and ensure fairness in the application of the emissions-based tariffs. A fee would be applied to any covered good (either a covered fuel or product produced within a sector) to be determined based on the domestic environmental cost incurred multiplied by the production of GHG emissions of the product or the upstream GHG emissions of the covered fuel. The BCA would not apply to (i) countries on the Least Developed Countries list of the OECD and (ii) countries that…

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