EU Adopts Carbon Border Adjustment Mechanism to Green Industrial Imports

The European Parliament and EU Member States announced this Tuesday morning that they have adopted an unprecedented mechanism to green Europe’s industrial imports by charging for the carbon emissions related to their production. Commonly referred to as a ‚carbon tax at the border‘, the scheme will subject imports in several sectors (steel, aluminium, cement, fertilizers, electricity, and hydrogen) to the EU’s environmental standards. This ‚Carbon Border Adjustment Mechanism‘ is quite complex – companies importing steel or cement from outside of the EU will now pay for both the material itself and the GHG emissions and electricity required to produce it. The goal is to turn European businesses towards more environmentally friendly domestic imports. A trial period begins in October 2023, with implementation depending on successful talks this week regarding the removal of free emission quotas which are currently given to European industries. The European Parliament wants these quotas phased out by 2027.

The Impact of Carbon Tax and Quotas

Carbon taxes and quotas have been implemented in many countries as a way to reduce greenhouse gas emissions. According to the World Bank, carbon taxes are estimated to reduce global emissions by up to 10 percent by 2020. In addition, the European Union has set a goal of reducing emissions by 20 percent from 1990 levels by 2020, largely through the use of carbon taxes and quotas. In Canada, the federal government has implemented a carbon tax on fuels such as gasoline and diesel that is expected to reduce emissions by up to 30 million tonnes per year. The United Kingdom has also implemented a carbon tax on electricity generation that is estimated to reduce emissions by up to 15 million tonnes per year. These policies have had a significant impact on reducing global greenhouse gas emissions, and are likely to continue to be used in the future.
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Picture source: Possessed Photography