G/MA/W/172  
G/C/W/800  
 
8 October 2021  
(21-7611) Page: 1/7 
Committee on Market Access  
Council for Trade in Goods  Original: English  
 
EUROPEAN UNION – PROPOSED CARBON BORDER ADJUSTMENT  MECHANISM (CBAM)  
QUESTIONS FROM THE RUSSIAN FEDERATION  
The following communication, dated 7 October 2021, is being circulated at the request of the 
delegation of the Russian Federation.  
 
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1  RELATIONSHIP WITH INTERNATIONAL CLIMATE AGREEMENTS AND WTO AGREEMENTS  
1.1  Set of Questions 1  
1. On what specific provisions of international climate agreements does the EU base its CBAM 
described in the European Commission's Prop osal for a Regulation of the European Parliament and 
of the Council establishing a carbon border adjustment mechanism, including its Annexes1 
(hereafter  – "Proposal")?  
 
2. Could the EU explain its interpretation of "the principle of equity and common but differentiated 
responsibilities and respective capabilities, in the light of different national circumstances"?  
 
1.2  Question 2  
In designing the CBAM, what specific provisions of the WTO Agreements did the EU take into account 
to ensure the EU 's compliance with its obligations and commitments in the WTO?  
 
2  PREVENTION OF THE RISK OF CARBON LEAKAGE  
2.1  Set of Questions 3  
Article 1 of the Proposal states that this Regulation establishes the CBAM "in order to prevent the 
risk of carbon leakage". Could the EU provide answers to the following questions:  
 
a) Whether the term "carbon leakage" is defined in EU law? Please describe the meaning of this 
term and provide references to specific provisions in EU law.   
b) What causes "carbon leakage"? Please provide referenc es to scientific analysis.  
c) Whether the EU assessed the risk of "carbon leakage" before the adoption of Directive 
2003/87/EC? Please provide references to this risk assessment and describe its result.  
d) Whether the EU assessed the risk of "carbon leakage" pr ior to designing the CBAM? Please 
provide references  to this risk assessment and describe its result.  
 
 
1 European Commission 's Proposal for a Regulation of the European Parliament and of the Council 
establishing a carbon border adjustment mechanism, 14.7.2021, COM(2021) 564 final.  G/MA/W/172 • G/C/W/800  
 
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  3  PROCEDURES FOR THE IMPORTATION OF COVERED GOODS  
3.1  Set of Questions 4  
Article 4 of the Proposal contains the requirement that goods listed in Annex 1 (cert ain CN codes of 
cement, electricity, fertilizers, iron and steel, and aluminum) "shall only be imported into the 
customs territory of the Union by a declarant that is authorised by the competent authority" of a 
Member State of the EU. Article 25 of the Pro posal establishes procedures at the EU 's border and 
requires that "[t]he customs authorities shall not allow the importation of goods unless the declarant 
is authorised by a competent authority at the latest at the release for free circulation of the goods ". 
In its turn, Article 17.9 of the Proposal states that "[t]he competent authority shall revoke the 
authorization for a declarant who no longer meets the conditions laid down in paragraph 1, or who 
fails to cooperate with that authority".  
 
1. Could the EU  explain from what date the importation of goods listed in Annex 1 by a 
non-authorised declarant will be prohibited?  
 
2. Could the EU provide an exhaustive list of reasons for revoking the authorization for a declarant 
and explain the rational for each of them.  
 
3.2  Question 5  
Chapter X of the Proposal contains transitional provisions on importation of goods listed in Annex I 
to the Proposal. In particular, according to Article 33.1, "[a] declarant importing goods shall be 
obliged to fulfil a reporting obligati on as set out in Article 35".  
 
Could the EU confirm that the Proposal envisages that from 1 January 2023 to 31 December 2025 
the importation of goods listed in Annex 1 will be conditioned by two requirements: (i) a declarant 
is established in the EU and ha s an Economic Operators Registration and Identification number; (ii)  a 
declarant 's obligation to submit a quarterly CBAM report within a month after the end of each 
quarter?  
 
3.3  Set of Questions 6  
Article 35.2 of the Proposal states what information shall be included in the CBAM report. The 
Proposal requires "a declarant importing goods" to provide, in particular, "the actual total embedded 
emissions … calculated in accordance with the method set out in Annex III", "the actual total 
embedd ed indirect emissions" and "the carbon price due in a country of origin for the embedded 
emissions in the imported goods, which is not subject to an export rebate or other form of 
compensation on exportation". Could the EU respond to the following question s: 
 
Does Article 35.2 contain an exhaustive list of required information?  
a) What specific "method set out in Annex III" shall be used for each category of covered goods 
(simple goods, complex goods, electrical energy)?  
b) Will verification requirements apply d uring the transition period?  
c) Why does the EU require information on "the actual total embedded indirect emissions"?  
d) Is it a correct understanding that under the phrase "the carbon price due in a country of 
origin for the embedded emissions in the imported goods, which is not subject to an export 
rebate or other form of compensation on exportation", the EU means the actually paid carbon 
price in the country of origin of the covered goods?  
 
4  METHODS  FOR CALCULATING EMBEDDED EMISSIONS AND CARBON PRICES UNDER T HE 
EU ETS AND THE PROPOSAL  
4.1  Set of Questions 7  
According to Article 1.2 of the Proposal, "[t]he CBAM complements the system established for 
greenhouse gas emission allowance trading within the Union by Directive 2003/87/EC by applying 
an equivalent set of r ules to imports into the customs territory of the Union of goods referred to in 
Article 2".  G/MA/W/172 • G/C/W/800  
 
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  With respect to methods for calculating embedded emissions, could the EU explain:  
a) What methods  and equations are used for calculating embedded emissions in goods, which 
are covered by the Proposal, under the EU Emissions Trading System (EU ETS)?  
b) Does the EU differentiate between "simple goods" and "complex goods" and how are these 
terms defined un der the EU ETS?  
c) Does the EU ETS establish the same rules for determination of actual direct embedded 
emissions for complex goods as described in para. 3 of Annex III of the Proposal? In 
particular, does the EU require that domestic producers of "complex g oods" use in their 
calculations "the value of emissions resulting from the installation where the input material 
was produced" and "that installation 's data can be adequately measured"?  
d) Does the EU ETS establish "default values" for embedded emissions and what are these 
values?  
e) Why does the Proposal require that "the default values shall be based on the average 
emission intensity of the 10 per cent worst performing EU installations for that type of goods" 
(para graph  4.1 of Annex III to the Proposal) and wha t is the EU 's justification for such a 
requirement?  
f) What does the EU understand under the wording "that type of goods" in connection with CN 
codes and description of goods covered in Annex I to the Proposal?  
 
4.2  Set of Questions 8  
With respect to the EU ETS, could the EU describe:  
a) What are the main principles of the EU ETS and how the EU regulates carbon pricing under 
the EU ETS?  
b) What is the total number of general allowances to be issued in each year in the period 
2021-2035?  
c) How many of general allowanc es are to be sold in each year in the period 2021 -2035?  
d) How many of general allowances are to be allocated for free in each year in the period 
2021-2035 and for what goods listed in Annex 1 to the Proposal?  
e) How many installations are excluded or exempted from the EU ETS? What are they and what 
goods  are produced by these installations?  
 
4.3  Set of Questions 9  
According to Article 21 of the Proposal "[t]he Commission shall calculate the price of CBAM 
certificates as the average price of the closing prices of E U ETS allowances on the common auction 
platform in accordance with the procedures laid down in Commission Regulation (EU) No 1031/2010 
for each calendar week".  Could the EU explain:  
 
a) Whether "the common auction platform" is the only platform that will be u sed for selling 
emission allowances in the EU?  
b) What is the price difference in emission allowances auctions at EEX held: (i) on behalf of 
Poland, (ii) on behalf of Germany and (iii) on behalf of 25 EU Member States and 3 EEA EFTA 
States as well as for the  Innovation Fund and the Modernisation Fund?  
c) What prices and fees/charges are covered by the term "the closing prices of EU ETS 
allowance"? Please indicate amounts of fees and charges, if any.  
d) Whether it is possible to use the previous day prices for sel ling the CBAM certificate and, if 
not, why not?  
 
4.4  Set of Questions 10  
In the document accompanying the Proposal, the European Commission claims that the "CBAM is 
designed with a view to mirror the EU emission trading system".  
 
1. Could the EU explain what elements of the EU ETS were reflected in the CBAM?  
 
2. Could the EU confirm that the following elements were "mirrored": (i) the price of the CBAM 
certificates and the price of the EU ETS allowances; (ii) the coverage of goods and greenhouse gases; 
(iii) exclusions and exceptions for covered goods, production methods and certain installations; 
(iv) methods for calculating embedded emissions for each category of covered goods; (v) reporting G/MA/W/172 • G/C/W/800  
 
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  obligations; (vi) book -keeping requirements; (vii) verificati on requirements; (viii) reasons for 
penalties and their amounts; (ix) procedures to address circumvention?  
 
5  CARBON PRICE PAID IN A COUNTRY OF ORIGIN  
5.1  Question 11  
Article 2.12 of the Proposal states that the EU "may conclude agreements with third countries with 
a view to take account of carbon pricing mechanisms in these countries in the application of 
Article  9". Could the EU explain whether the conclusion of such agreements will be subjected to any 
conditions? If yes, what are these conditions?  
 
5.2  Set of Questions 12  
Article 9.1 of the Proposal stipulates that "an authorised declarant may claim in its CBAM declaration 
a reduction in the number of CBAM certificates to be surrendered in order for the carbon price paid 
in the country of origin for the declared embedded emissions to be taken into account". Could the 
EU respond to the following questions:  
 
a) What provision of the Proposal requires the competent authority to take into account the 
carbon price paid in the country of origin?  
b) Could the EU conf irm that the total amount of the CBAM certificates and, therefore, amount 
of carbon price to be paid in relation to the importation of products would be reduced?  
c) Could the EU provide an exhaustive list of conditions for the reduction in the number of 
CBAM  certificates to be surrendered?  
d) Should the third country have a specific agreement with the EU for a carbon price paid in 
that country  to be accepted by the competent authority?  
 
5.3  Set of Questions 13  
Articles 9.2, 9.4 and 35.2(d) of the Proposals refer to  the condition for acceptance of the carbon 
price paid in the country of origin, namely that carbon price "should not have been subject to an 
export rebate or any other form of compensation on exportation". In contrast, according to Article 
2.5(b) one of t he conditions for exclusion of a country from the CBAM is that "the price paid in the 
country where the goods are originating in is effectively charged on those goods without any rebates 
beyond those also applied in the EU ETS". Could the EU respond to the  following questions:  
 
a) With respect to "export rebates and any other form of compensation on exportation", could 
the EU explain what rebates and compensations are applied in the EU ETS and in the 
countries which the EU listed in Section A of Annex II to th e Proposal?  
b) How does the EU explain differences in the conditions for acceptance of the carbon price 
actually paid in the country of origin?  
c) Could the EU confirm that the carbon price actually paid by an installation in the country of 
origin will be accept ed and the total number of CBAM certificates to be surrendered will be 
reduced to reflect this payment?  
d) Would the EU accept expenses of an installation which resulted in decreased emissions of 
greenhouse gases listed in Annex I and take these expenses into  account in calculating the 
total number of CBAM certificates to be surrendered?  
 
5.4  Set of Questions 14  
According to Article 9 of the Proposal, records of the documentation, confirming that a carbon price 
was paid in the country of origin of the good, shall be certified by "an independent person". Could 
the EU explain:  
 
a) What is the reason for not accepting producers ' records and establishing an additional 
requirement for certification which will result in additional costs?  
b) What qualifications will be requir ed by the EU in order to be recognized as "the independent 
person"? Does  the EU envisage citizenship, domicile or other similar requirements to qualify 
as "the independent person"?  G/MA/W/172 • G/C/W/800  
 
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  6  CBAM CERTIFICATE  
6.1  Set of Questions 15  
Chapter IV of the Proposal provides requirements regarding CBAM certificates. In particular, 
Article  20.1 of the Proposal contains the requirement that "[t]he competent authority of each 
Member State shall sell CBAM certificates to declarants authorised in that Member State at the p rice 
calculated in accordance with Article 21".  
1. Could the EU clarify whether it considers the obligatory payment for the CBAM certificate as import 
duty, additional duty, charge or internal tax?  
2. Could the EU explain why the Proposal allows to sell CBAM certificates only to authorised 
declarants and not to exporting companies?  
6.2  Question 16  
Article 22 of the Proposal states that "by 31 May of each year, the authorised declarant shall 
surrender a number of CBAM certificates to the competent authority t hat corresponds to the 
embedded emissions". It appears that the number of CBAM certificates and, therefore, the amount 
of price to be paid, will be different for like or similar products originating in different WTO Members.  
Could the EU elaborate whether this understanding is correct? If so, could the EU explain the legal 
basis for such differences in treating like or similar products?  
6.3  Set of Questions 17  
Chapter IX of the Proposal concerns coordination of the CBAM with free allocation of  allowances 
under the EU ETS. Article 31.1 provides that the CBAM certificates to be surrendered in accordance 
with Article 22 shall be adjusted to reflect the extent to which EU ETS allowances are allocated free 
of charge in accordance with Article 10a of  Directive 2003/87/EC to installations producing, within 
the EU, the goods listed in Annex I. According to Article 31.1, a calculation methodology for the 
reduction referred in Article 31.1 will be set out in the implementing acts by the European 
Commissio n.  
In its turn, paragraph 1a, which is proposed for insertion into Article 10a of Directive 2003/87/EC2, 
refers to the CBAM factor, i.e. "a factor reducing the free allocation for the production" of goods 
listed in Annex I to the Proposal. Paragraph 1a s tates, inter alia , that "[t]he CBAM factor shall be 
equal to 100 % for the period during the entry into force of [CBAM regulation] and the end of 2025, 
90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth 
year".  
1. Could the EU explain what methodology it intends to use in order to ensure that the CBAM and 
the mechanisms that the EU applies to prevent the risk of carbon leakage under the EU ETS are not 
cumulative?  
2. Could the EU explain its plan with respect to fin ancial measures referred to in Article 10a(6) of 
Directive 2003/87/EC which, according to the European Commission, are used to address the risk 
of carbon leakage in sectors or sub -sectors at risk of carbon leakage?  
7  EXCLUSIONS AND EXEMPTIONS OF GOODS ORIGIN ATING IN CERTAIN WTO MEMBERS 
FROM THE CBAM  
7.1  Question 18  
According to Articles 2.3, 2.7, 2.8 of the Proposal, the CBAM does not apply to goods originating in 
certain countries and territories. Section A in Annex II provides, in particular, a list of countrie s and 
territories that have been excluded from the scope of the CBAM. There are four WTO Members in 
 
2 European Commission 's Proposal for a Directive of the European Parliament and of the Council 
amending Directive 2003/87/EC establish ing a system for greenhouse gas emission allowance trading within 
the Union, Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve 
for the Union greenhouse gas emission trading scheme and Regulation (EU) 2015/757,  14.7.2021, COM(2021) 
551 final.  G/MA/W/172 • G/C/W/800  
 
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  Section A. Section B in Annex II will contain a list of countries and territories outside the scope of 
the CBAM with regard to the importation of electricit y into the customs territory of the EU. At the 
moment, Section B is empty.  
 
Could the EU explain on what provisions of the WTO Agreements it relies in justifying the exclusion 
and exemptions of certain countries and their goods from the CBAM?  
 
8  PROCEDURES FOR VERIFICATION AND ACCREDITATION  
8.1  Set of Questions 19  
Article 8 of the Proposal contains provisions on verification of embedded emissions. According to 
Article 8.1, the authorised declarant shall ensure that the total embedded emissions declared in the 
CBAM declaration are verified by an accredited verifier, based on the verification principles set out 
in Annex V. In addition to verification principles, Annex V to the Proposal describes the minimal 
requirements for the content of a verification report. Cou ld the EU respond to the following 
questions:   
 
a) Whether during the transition period of the CBAM the EU will require a verification of 
emissions, including installation visits, for the CBAM report which each declarant shall submit 
for each quarter of a calendar year in accordance with Article 35.1 of the Proposal?  
b) How many verifiers and how many installation visits are required by the EU to carry a 
verification and to prepare a verification report under the CBAM?  
c) What specific criteria should be met in o rder for the EU to waive a mandatory installation 
visit? 
d) Will the EU require a verification of an installation producing an input material (precursor)?  
e) Does the EU ETS require to include in the verification report for "complex goods" quantities 
of input ma terials (precursors) used, the specific embedded emissions and "the identification 
of the installation where the input material has been produced and the actual emissions from 
the production on that material"?  
f) Could the EU confirm that procedures for verif ication of embedded emissions, principles of 
verification, thresholds for deciding whether misstatements and non -conformities are 
material and content of a  verification report under the CBAM mirror those under the EU ETS?  
 
8.2  Set of Questions 20  
Article 18 o f the Proposal establishes rules for the accreditation of verifiers. In particular, Article 18.3 
of the Proposal indicates that in the adopted delegated acts the European Commission will specify 
certain conditions including for "mutual recognition and peer  evaluation of the accreditation bodies". 
Could the EU respond to the following questions:   
 
a) Whether a person and an accreditation body established in a third country can become an 
accredited verifier for the purpose of the CBAM? What criteria will be appl ied and what 
procedures should be followed for such an accreditation?  
b) What are the conditions for "mutual recognition and peer evaluation of the accreditation 
bodies" for the purpose of the CBAM?  
c) Could the EU confirm that verification bodies established in  third countries would be 
accredited under the  CBAM regulation?  
 
9  ADAPTATIONS BASED ON VARIOUS FACTORS, INCLUDING NATURAL RESOURCES AND 
SPECIFIC MARKET CONDITIONS  
9.1  Set of Questions 21  
Article 7.6 of the Proposal states that "the default values can be adapted  to particular areas, regions 
or countries to take into account specific objective factors such as geography, natural resources, 
market conditions, prevailing energy sources, or industrial processes". Paragraph 6 of Annex III to 
the Proposal also provides for an adaptation of default values and lists several "factors such as 
natural resources, market conditions, energy mix of industrial production".  
 
1. Could the EU provide an exhaustive list of "factors" and reasoning for using these factors for 
adaptatio ns of default values?  G/MA/W/172 • G/C/W/800  
 
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  2. Could the EU provide an example of how the default values can be adapted to such factors as 
"natural resources" and "market conditions"?  
 
3. Could the EU explain what specific elements will be considered under the terms "natural resources" 
and "market conditions"?  
 
4. Could the EU elaborate why it establishes a correlation between the embedded emissions released 
during the production of goods and the geographical and economic environment in the country of 
origin of the covered go ods? 
 
10  USE OF REVENUE GENERATED BY THE CBAM  
10.1  Set of Questions 22  
1. Could the EU indicate whether it expects the carbon price to rise and to what extent?  
 
2. Will the EU establish a cap on the number of CBAM certificates?  
 
3. Will the number of CBAM certificates released depend on the volume of production in covered EU 
sectors? If the EU's production of a product, which is covered by the CBAM, substantially decreases 
or stops, will the EU exclude this sector from the CBAM coverage?  
 
4. What is the EU 's expectation with respect to the amount of revenue generated by the CBAM each 
year?  
 
5. How does the EU plan to allocate and spend this additional revenue? Please provide a list of 5. 
programs.  
 
6. How the EU could confirm its full compliance with the Ag reement on Subsidies and Countervailing 
Measures in the use of revenue generated by the CBAM?  
 
11  SUBSTANTIAL ADMINISTRATIVE BURDEN AND NEGATIVE IMPACT ON 
INTERNATIONAL TRADE  
11.1  Question 23  
The CBAM is designed in such terms that it will result in substantial ad ministrative burden and 
additional importation costs of the covered goods. The cost of CBAM certificates together with 
extensive administrative requirements and associated costs will inevitably reduce import of these 
goods to the EU.  
 
Has the EU considere d the possibility of reducing administrative requirements in order to lessen 
administrative burden and trade restrictiveness of its CBAM?  For example, has the EU considered 
elimination of the requirement that only an authorised declarant registered in the EU can import 
covered goods? Could the EU reduce reporting and verification requirements to an absolute 
minimum?  
 
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