Highlights:

• On July 14, the EC proposed detailed measures to implement its green deal plan. It contains concrete and also ambitious targets for accelerating the reduction of carbon emission, incl. broader carbon pricing and tougher emission standards for cars. It includes the phasing out of domestic carbon credits over 10 years.
• In order to limit carbon leakage to third countries the EC proposes an adequate cross border adjustment mechanism (CBAM) that effectively introduces carbon taxes on imports.
• While resistance against the plan is likely, we ultimately expect a sensible compromise, not least due to support of affected regions from the EU budget and additional tailwind from the ECB’s new strategy giving additional incentives for firms to become greener.
• Regarding markets the near-term impact of the recently announced measures is rather neutral in rebalancing the cards between winners and losers. Among sectors, building and materials are the main beneficiaries while Utilities and Autos will have to adapt.
• Forthcoming sizeable green issuance in the EU will help growing and greening European finance in a more balanced and standardised way.

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