On June 10, ISDA responded to the European Commission’s (EC) consultation on the calculation of the carbon price paid in a third country under Article 9 of the Carbon Border Adjustment Mechanism (CBAM).

ISDA supports the EC’s proposal that evidence of the carbon price effectively paid should encompass all compliance options recognized under third-country pricing mechanisms, including the use of domestic carbon credits and international carbon credits, to meet CBAM obligations. The response encourages consideration of mutual recognition mechanisms for carbon prices paid in the context of electricity trades, as well as increased publicly available project-level information and disclosure under CBAM. It also proposes replacing the 10% cap on the use of international carbon credits with a reference to the quantitative limit established under the applicable third-country carbon pricing mechanism to ensure a level playing field with the treatment already afforded to domestic credits.