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23. (...) In the area of rail transport, reforms agreed under the fourth EU Railway Package in 2016 were phased in, while for air transport, the Commission approved a revised proposal to reform the "Single European Sky", which also aims to address carbon emissions. (...)

1.1. (...) Guiding its direction and policies on the economy and trade, the Treaty on European Union provides that the European Union will pursue "(...) and a high level of protection and improvement of the quality of the environment" (Article 3).

1.16. The European Union has set out its common Policy Objectives and Priorities for 2020-2024, which identify its political goals or top priorities. Several of these policy objectives have an impact on the European Union's economic policy direction, including ensuring a full recovery from the COVID-19 pandemic; prioritizing actions that accelerate the transition to a fairer, healthier, greener, and more digital society; and strengthening the economy to make it more resilient and robust. As part of this policy direction, six broad strategic priorities have been identified, each with a number of plans, sub-components, strategies, or agendas that contribute to the overall objective:
(...)
• A European Green Deal – Striving to be the first climate-neutral continent;
(...)

1.17. (...) In March 2020, the European Union issued a communication on the circular economy and its action plan, which sets out to mainstream the circular economy and make sustainable products, services, and business models the norm. Through the action plan, the policy addresses a number of issues such as designing a sustainable product policy framework, improving waste prevention policies, and addressing key product value chains. The European Green Deal includes a number of proposals for reducing greenhouse gas emissions through climate, energy, and transport policies (see also Section 4). [18]
[18] A presentation to the Committee on Trade and Environment in October 2022 includes selected initiatives, i.e. a proposal for a Carbon Border Adjustment Mechanism (CBAM), a proposal for a new regulation on waste shipments, and a green claims initiative.

2.4. During the review period, the European Union embarked on a new development strategy under the European Green Deal (2019) with the aim of becoming a carbon-neutral economy by 2050. This target became binding in July 2021 with the adoption and entry into force of the Regulation establishing the framework for achieving climate neutrality (European Climate Law). (...) These strategies, in particular the European Green Deal, imply significant changes and coordination across sectors and policy areas, and have led to the review of various EU policies including, inter alia, its agriculture, energy, industrial, and trade policies.

2.6. (...) The new policy – An Open, Sustainable, and Assertive Trade Policy – was published in February 2021 following a public consultation process. The policy sets the European Union's priorities until 2030 and replaces the Trade for All Strategy that had been in place since 2015.

2.8. Regarding the multilateral trading system, the new strategy [An Open, Sustainable, and Assertive Trade Policy] reflects the key role that the WTO continues to play in EU trade policy. (...) It also stresses the importance for the European Union of taking a leading role in the development of trade rules in the WTO on, for example, fossil fuel subsidies and digital trade, to advance its green and digital transitions.

2.10. The proposed measures include:
(...)
• a Carbon Border Adjustment Mechanism (CBAM) for imports of certain goods (i.e. aluminium, cement, iron and steel, fertilizers, electricity, and hydrogen) (area of action No. 2) ;
(...)
[To support the implementation of its new trade strategy, in 2021 the Commission submitted proposals for regulations to the Parliament and the Council (Chart 2.2), including measures to counteract foreign practices considered as unfair or coercive.]

Chart 2.1 An Open, Sustainable, and Assertive Trade Policy 2021-30
Three objectives: 1. Support the recovery and transformation of the economy in line with the European Union's green and digital objectives. 2. Shape global rules for a more sustainable and fairer globalization. (...)
Six areas of action: (...) 2. Supporting the transition towards a greener economy and promoting value chains that are sustainable, and in line with EU standards. (...)
Source: European Commission Communication COM(2021) 66 final.

2.12. In addition to the review of its trade policy, the Commission has updated its strategy in various areas to support the EU environmental and digital objectives, and adapt them to the most recent geopolitical developments, notably the war in Ukraine. Some of these strategies have implications for trade, such as the new energy (Section 4.4) and industrial strategies. Under the updated industrial strategy of 2021, the European Union seeks, inter alia, to reduce dependencies from third countries for its value chains in strategic areas by diversifying suppliers, substituting inputs, and pursuing international alliances. These dependencies have been identified in energy-intensive (e.g. raw materials and chemicals), health (e.g. active pharmaceutical ingredients), and advanced technologies (e.g. semiconductors, lithium batteries, and hydrogen) sectors. (...)