Carbon border tax agreed by the European Union

The European Union has set in place a deal that is designed to create a significant step in preventing catastrophic climate change.

After negotiations that ran late into Tuesday night, the EU imposed a carbon dioxide emissions tariff on imports of polluting commodities such as cement and steel, a scheme that aims to strengthen European industries as they continue on the pathway of decarbonisation.

Negotiators achieved consensus at around 5am in Brussels, on the law to impose CO2 emissions costs on imports of cement, fertilisers, aluminium, electricity, iron, and steel.

Businesses that import those goods into Europe will now be required to purchase certificates to cover their CO2 emissions. The scheme is designed to apply the same CO2 costs to non-European companies and domestic EU industries, with EU member nations already obliged to acquire permits from the EU carbon market when they are responsible for pollution.

The new law, known as the Carbon Border Adjustment Mechanism (or CBAM), is being cited as a crucial pillar of European climate policies. It stands as one of the only mechanisms to incentivise the EU’s trading partners to decarbonise their manufacturing industries.

The over-riding objective of the levy is to put a stop to European industries being undercut by lower cost commodities produced in regions with inadequate rules around pollution and the environment. Further details on the new law will be determined later this week in ongoing negotiations that will further reform Europe’s carbon market. The move by the EU has been criticised by a number of other nations including China.

AiGroup, a body seen as a powerful ally for Australia’s business sector, has stated that the Australian Government must establish a similar mechanism to safeguard international competitiveness the country’s largest emitters. AiGroup went on to recognise that the establishment of an Australian CBAM would be ‘‘a big exercise’’, however it would be necessary to position Australia in comparable advantage as other major economic blocks, including the EU.

Here at Carbon Neutral, we welcome the news as another positive step in the fight against the global climate crisis, and an opportunity for offset developers to assist exporters here in Australia.

Source:

https://www.cnbc.com/2022/12/13/eu-reaches-agreement-on-first-of-its-kind-carbon-border-levy.html

Addendum (19/12/2022):
Since the publication of this article, the agreement has further developed with the extension on emissions trading to include heating, road transportation and shipping.

Representatives of the 27 EU member states and the European Parliament have now fast-tracked the pace at which businesses, from energy providers to steel manufacturers, are obliged to reduce their pollution.

The deal that protects European Union-based producers from low-cost overseas competitors complements the measures agreed upon last week. Policymakers have also set out the timeline for phasing in the Carbon Border Adjustment Mechanism from 2026.

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