HomeWorldThe EU reaches an agreement on the world's first carbon border fee

The EU reaches an agreement on the world’s first carbon border fee

BRUSSELS (Reuters) – After all-night negotiations, the European Union reached a political agreement on Tuesday to impose a carbon dioxide emissions tariff on imports of polluting goods such as steel and cement, a plan pioneer in the world that seeks to support European industries in their process of decarbonizing

Negotiators from EU countries and the European Parliament reached an agreement around 5 am in Brussels on the law to impose CO2 emission costs on imports of iron and steel, cement, fertilizers, aluminum and electricity.

Companies importing these products into the EU will need to purchase certificates to cover their embedded CO2 emissions. The scheme is designed to apply the same CO2 cost to foreign companies and domestic EU industries, the latter of which are already required to buy permits from the EU carbon market when they pollute.

Mohammed Chahim, the law’s chief negotiator in the European Parliament, said the border tariff would be crucial to the EU’s efforts to combat climate change.

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“It is one of the only mechanisms we have to incentivize our trading partners to decarbonise their manufacturing industry,” Chahim said.

The aim of the tax is to prevent European industry from being undermined by cheaper goods made in countries with weaker environmental standards.

It will also apply to imported hydrogen, which was not in the original EU proposal but which EU lawmakers pushed for in negotiations.

Some details about the law, including its start date, will be determined later this week in related negotiations on a reform of the EU carbon market.

The EU currently grants free CO2 permits to domestic industry to protect them from foreign competition, but plans to phase out those free permits when the carbon border fee is introduced, to comply with World Trade Organization rules. How quickly onboarding occurs will be decided in the carbon market talks.

Brussels has said that countries could be exempted if they have climate change policies equivalent to those of the EU, and suggested that the United States could circumvent the tax on this basis.

Still, the EU plan has faced criticism from countries including China, and comes amid heightened trade tensions with the United States over Cut Inflation Act subsidies for green technologies, which the EU says could hurt European companies.

The fee is part of an EU policy package designed to help the world avoid disastrous climate change by cutting EU emissions by 55% by 2030 from 1990 levels.

(Reporting by Kate Abnett; Editing by Benoit Van Overstraeten)

Copyright 2022 Thomson Reuters.

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