TRANSITIONING TO LOW CARBON TRADE – IS CENTRAL ASIA READY?

For context, in December 2022, the European Parliament and Council reached an agreement on the Carbon Border Adjustment Mechanism (CBAM) and reform of the European Union (EU) Emissions Trading Schemes (ETS). The CBAM entered into law in May 2023, and the implementing legislation detailing reporting obligations during the transition period was adopted in August 2023. This initiative is being implemented as a tool to deal with carbon leakage – i.e., to prevent shifting emissions to other countries as a means of to overcome the high domestic prices set within the EU. The CBAM will initially apply to selected emissions-intensive sectors deemed at greater risk of carbon leakage: steel, cement, aluminum, fertilizers, electricity, and hydrogen. However, product coverage under the final agreement goes beyond those initially proposed by the European Commission; and there are expectations to include indirect emissions of more products, and broaden the scope of products covered. 

These carbon regulatory measures may pose additional green requirements for exports from developing countries, but compliance with these requirements can present opportunities for businesses to become more competitive players in the market. Meeting these requirements, and leveraging business opportunities, however, require significant actions by businesses to be able to assess and reduce their carbon footprints – and effectively move towards a low-carbon growth. Accordingly, the Central Asian region is highly dependent on fossil fuels, both in terms of production and consumption. The EU is one of the main trade partners for the region (accounting for about a third of its overall external trade). With efforts ramping up to integrate climate considerations in trade and industrial policy frameworks around the world, it is important for this region to keep up as well.

This webinar, thus, seeks to take stock of the developments taking place in the EU and other jurisdictions in terms of operationalizing these carbon border adjustment measures, discuss its potential impact on trade from the Central Asian region, and explore the tools that can be leveraged by countries at the national and potentially at the regional level - to prepare for this transition to carbon competitive supply chains.