Denis Naughten (Roscommon-Galway, Independent)
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224. To ask the Minister for Finance if consideration has been given to adopting climate change principles to deter carbon offshoring and thereby reduce global emissions in order to underpin trade and international relations; and if he will make a statement on the matter. [58702/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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On 14 July 2021, the European Commission published a proposal for a new Carbon Border Adjustment Mechanism (CBAM) which will put a carbon price on imports of a targeted selection of products so that ambitious climate action in Europe does not lead to ‘carbon leakage’. This will ensure that EU emission reductions contribute to a global emissions decline, instead of pushing carbon-intensive production outside Europe. It also aims to encourage industry outside the EU and international partners to take steps in the same direction.

The CBAM has been designed in compliance with World Trade Organization (WTO) rules and other international obligations of the EU. The CBAM regulation proposes putting a price on third country imports of certain high-polluting goods based on their embedded emissions. As per the general approach agreed in March 2022, the CBAM will initially apply to imports of cement, iron and steel, aluminium, fertilisers and electricity as these sectors have a high risk of carbon leakage and high carbon emissions. The CBAM is designed to function in parallel with the EU’s Emissions Trading System (EU ETS), to mirror and complement its functioning on imported goods. It will gradually replace the existing European Union mechanisms to address the risk of carbon leakage, in particular the free allocation of EU ETS allowances.

Ireland is broadly supportive of the climate ambition of CBAM and is actively engaged in negotiations to reach agreement on a feasible operational structure.