EU proposes world’s first carbon border tax

Austraia and Russia were among the first countries to denounce it

The Commission has put forward as part of its mega climate package plans for the world’s first carbon border tax, news wires reported. It may need to be imposed on imports of carbon-intensive steel, aluminium, cement, fertilisers and electricity.

The border levy should be phased in from 2026, the Commission said, and is designed to protect European industries from competitors abroad whose manufacturers can produce at lower cost because they are not charged for their carbon output.

Under the proposal, a transitional phase from 2023-25 will require importers, including those importing electricity, to monitor and report their emissions. Importers will be required to buy digital certificates representing the tonnage of carbon dioxide emissions embedded in the goods they import. The price of the certificates will be based on the average price of permits auctioned each week in the EU carbon market.

EU carbon prices have hit record levels of more than 58 euros a tonne this year. Most analysts expect prices to continue to rise to 2030, spurred by the prospect of the carbon market reforms the Commission also proposed on Wednesday as part of a broad package of measures to deliver the EU’s climate change targets. The border levies can, however, be reduced.

"If importers can prove, based on verified information from third country producers, that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted from their final bill," the Commission said in a factsheet outlining the policy.

Some 64 carbon pricing instruments such as emissions trading schemes or taxes are in use around the world, in places including China and some U.S. states, not least California. But they cover only 21% of global greenhouse gas emissions, a May report by the World Bank said.

Expectedly, the new levy was put under serious criticism. Australia was fast to denounce EU plans to tax exporters of CO2-intense products, such as steel, in order to create a level playing field for EU firms bound by emissions rules. "The last thing the world now needs is extra protectionist policies being put in place," Australian trade minister Dan Tehan. The EU carbon-tax would hit Russian products worth €6.4bn, including iron ore, steel, aluminium, and pipes, Russia commented.

More on this subject: Climate crisis

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