EU adopts new ‘carbon tax’ on industrial imports

A new “carbon tax” in Europe. On Tuesday, the European Parliament and EU member states announced 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.

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

Avoid ecological dumping

With the soaring price of a ton of CO2, the idea is to avoid “ecological dumping” which would see manufacturers relocate their production outside Europe, while encouraging the rest of the world to adopt European standards. In practice, the importer will have to declare the emissions directly linked to the production process, and if these exceed the European standard, acquire an “emission certificate” at 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 system will take into account “indirect” emissions, those generated by the electricity used for the production of imported products. 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.

Thus, as and when, the EU will gradually remove 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.

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