On July 14, as part of the Green Deal for Europe, the European Commission unveiled 12 draft directives and regulations, including provisions on thermal renovation, accelerating the transition to renewable energies and strengthening forests, with a view to achieving carbon neutrality by 2050.
Let's focus on the border carbon adjustment mechanism.

This project, which has been in vogue for several years, follows a fairly simple guideline: in addition to the selling price of imported products and services, a cost is added - based on the carbon emissions trading scheme (ETS) - calculated according to the carbon emissions of the product or service in question. It could bring in between 5 and 14 billion euros per year and is scheduled to come into force in 2023.

The latter reflects a new European approach to globalization and international trade in the region with the most imported emissions in the world. For example, in France, these emissions represent 37.6% of the total carbon footprint of households.

In addition to the climatic need to meet the first objective set by the green deal - to comply with the Paris Agreement - to reduce carbon emissions by 55%, compared to the pre-industrial era, by 2030 within the European Union - the project aims to slow down, as much as possible, the relocation of companies to territories where environmental taxation is more advantageous and to ensure fair competition between intra and extra European companies.

Such a mechanism will also promote the competitiveness of European manufacturers by increasing the costs of products imported from third countries.

Beware, however, that the recent surge in the price of CO2 on the European carbon market - which reached an all-time high of €56 per ton last May - could put a serious damper on the project, prompting companies from non-EU countries not subject to the scheme to trade with each other, with reprisals against European exporters.

It is also possible that other WTO members will set up such mechanisms, but there is no indication that they are based on the European carbon cost model.

Moreover, some third countries do not have enough information on the CO2 they emit in the manufacture of products and others could minimize it, so it will be necessary to ensure the effectiveness of the implementation of control bodies.

Such a mechanism - to be compatible with WTO rules - will probably have to be accompanied by a progressive limitation of allowances granted free of charge in energy-intensive sectors - already announced for the aviation sector in the first 12 projects of the green deal - inevitably widening the spectrum of the said market.

While it is too early to predict the full impact of the border carbon adjustment mechanism on businesses and international trade, we can already draw several lessons from it:

A likely development of territorial industries as well as an increase in intra-European trade
A need for pedagogy from the European authorities to the international trade partners
A consequent expansion of the carbon emissions trading system
An increase in carbon pricing