Home News The EU adopts a “carbon tax” at the borders, an unprecedented step

The EU adopts a “carbon tax” at the borders, an unprecedented step

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The European Parliament and EU Member States announced on Tuesday 13 December that they had agreed to adopt an unprecedented mechanism aimed at greening industrial imports from Europe by charging for the carbon emissions linked to their production.

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Commonly called “carbon border tax” although it is not a tax as such, this unprecedented device on this scale will consist in applying to imports from the Twenty-Seven the criteria of the European carbon market, where EU manufacturers are required to ‘buy some “rights to pollute”.

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Avoid “ecological dumping”

The mechanism will target the sectors deemed the most polluting (steel, aluminum, cement, fertilizer, electricity, but also hydrogen), the European institutions indicated in two separate press releases, after long night negotiations concluded in the early morning. With the soaring price per tonne of CO2, the idea is to avoid a “ecological dumping” which would see manufacturers relocate their production outside Europe, while encouraging the rest of the world to adopt European standards.

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This device of“carbon border adjustment” (CBAM in English) “will be a crucial pillar of European climate policies, it is one of the only mechanisms we have to incentivize our trading partners to decarbonise their industry”explained MEP Mohammed Chahim (S&D, Social Democrats), negotiator for Parliament.

In practice, the importer must declare the emissions directly linked to the production process, and if these exceed the European standard, acquire a “emission certificate” to the price of CO2 in the EU. If a carbon market exists in the exporting country, it will only pay the difference. According to the agreement, the device will take into account emissions “indirect”those generated by the electricity used for the production of imported products.

Progressive calendar

A test period will begin in October 2023, during which importing companies will simply have to report their obligations. The timetable for the effective implementation of the scheme, which will be gradual, will depend on further talks at the end of the week on the rest of the reform of the EU carbon market, at the heart of the European climate plan.

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So, as this “border adjustment” will increase in power, the EU will gradually eliminate the free emission quotas allocated until now to European industrialists to allow them to face competition from outside Europe.

The rate at which these free quotas will be abolished and the possibility of alternative aid for European exporters, so as not to put them at a disadvantage on the world market, are still the subject of fierce discussions.

Are we (still) free to pollute?

MEPs are calling for a very gradual abolition of free quotas from 2027, before their complete disappearance in 2032, when the CBAM would fully come into force. States defend a very gradual elimination between 2026 and 2035.

This is a crucial point: by treating imports and local production equally, Brussels considers that it is complying with the rules of the World Trade Organization (WTO) and countering the accusations of “protectionism”.

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