EU Climate Regulations to Catalyze Stronger Global Carbon Policies – Panel
Tightening EU climate regulations are expected to catalyze stronger global carbon policies, with policy certainty crucial for building confidence in investing in transition technologies and initiatives, panelists said on Wednesday during a discussion hosted by OPIS, a Dow Jones company, at the Wall Street Journal’s Journal House in Singapore.
Evolving EU climate policy, particularly the Carbon Border Adjustment Mechanism (CBAM) that seeks to level the carbon emission costs for products imported into the EU, will have a material impact on major EU exporters such as China and India.
This has intensified efforts to establish robust carbon pricing outside the EU, encouraging countries to strengthen their own emission trading schemes (ETS), said Vidur Nayar, Head of Environmental Trading Asia-Pacific at Hartree Partners, who described CBAM and its ramifications as the “ultimate climate chess game”.
Examples of countries’ responses to CBAM include China’s recent inclusion of the cement and aluminum sectors in its ETS, aligning with the sector coverage under CBAM, and South Korea’s preparation of trade-exposed companies for EU regulations ahead of implementation.
Nayar believes the intent of the EU regulations is to spur climate actions in other countries rather than impose additional taxes on products. However, it has triggered diplomatic responses, as seen by Turkey’s proposal to join BRICS.
On a corporate level, companies outside of the EU need to take proactive steps to enhance their reporting, disclosure, and putting forward contracts to ensure readiness and alignment with the CBAM tariff and the EU ETS price, said Jaclyn Dove, Global Head of Sustainable Finance Strategic Initiatives at Standard Chartered.
This, however, would not necessarily lead to a significant inflow of EU Allowances or CBAM certificates into the EU, as countries would prefer to retain and use their carbon revenues within their own regions, added Nayar.
The opportunity also lies in companies shaping policies in their home countries, allowing them to influence how these evolve, align incentives with their interests, and position themselves to address challenges, said Dale Hardcastle, Global Head of Carbon Markets at Bain & Company.
Panels meanwhile underscored the importance of policy and regulatory certainty in enabling companies and investors to make informed decisions, commit resources, and drive the necessary investment and transition efforts.
Hardcastle pointed out that policy uncertainty is a key factor that could hold back the ability to scale up finance and move forward with the next stages of projects.
There is sufficient green finance available, but the challenge is scaling it up to meet investment needs and direct capital where it’s most required for scalability, added Dove. Achieving net-zero ambitions will necessitate global collaboration, involving both public and private capital, with policymakers facilitating essential regulations and capital flows.
Nayar added that the lack of policy certainty has been a challenge, but he believes CBAM is bringing the conversation “front and center” and helping to strengthen ETS and climate finance initiatives.
The markets need to iteratively develop policies that will not be perfect on day one, and all these need to be improved over time; what companies and corporations are looking for most is regulatory certainty and a clear pathway, he said.
“From my perspective, any increase in pricing or internal carbon pricing that CBAM does result in, allows better investment decisions and unlocks green finance over a longer period,” said Nayar.
The panel session, hosted by OPIS, was part of a two-day Journal House event organized by The Wall Street Journal. Watch the recordings of both OPIS panel sessions:
“The Growing Reach of Emissions Rules”
“New Dynamics of Solar”
Find the complete Journal House Singapore program and recordings here.
Reporting by Lujia Wang, lwang@opisnet.com
Editing by Hanwei Wu, hwu@opisnet.com
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