The European Union has announced a deal to impose a carbon dioxide tariff on imports of polluting goods such as steel and cement.
Known as the “Carbon Border Adjustment Mechanism” (CBAM), the agreement will cover industrial imports from the bloc’s 27 member states, targeting the highest polluting products first.
The bloc says a scheme is crucial to support European industry during its low-carbon transition.
This CBAM scheme “will be a crucial pillar of European climate policies … to encourage our trading partners to de-carbonise their industry”, explains MEP Mohammed Chahim from the Socialists and Democrats Party.
In practice, the importer will have to declare the emissions 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.
The mechanism, essentially administered centrally at an EU level, will target the sectors considered to be the most polluting (steel, aluminium, cement, fertilizers, electricity), as proposed by the European Commission.
A test period will begin in October 2023, during which importing companies will simply have to report their obligations.
The timing of the actual start will depend on talks at the end of the week on the rest of the reform of the European carbon market.
Currently, European manufacturers are allocated free allowances covering part of their emissions, to support their competitiveness against foreign competitors.
As the ‘border adjustment’ gains momentum, the free allowances distributed to the sectors concerned will be phased out.