On Sunday, the European Union (EU) initiated the world’s first-ever system to levy CO2 emissions tariffs on imports. This ground-breaking tariff will be imposed on foreign goods like steel and cement, aiming to curtail the influx of foreign products that could sabotage the EU’s green transition objectives.
Despite raising concerns among global trading counterparts, the EU’s move is a step forward in countering more polluting imports. At a recent forum, Xie Zhenhua, China’s primary climate delegate, cautioned against countries employing such unilateral measures.
The system, dubbed the Carbon Border Adjustment Mechanism (CBAM), won’t commence collecting CO2 tariffs at entry points until 2026. The inaugural phase, however, necessitates EU importers to disclose greenhouse gas emissions integrated during the manufacturing of imported goods, notably iron, steel, aluminium, cement, electricity, fertilisers, and hydrogen. From 2026, to maintain parity with EU industries purchasing permits from the EU carbon market, importers will be obligated to buy certificates covering these CO2 emissions.
Paolo Gentiloni, the European Economy Commissioner, highlighted the initiative’s twofold objective: to stimulate a global tilt towards eco-friendly production and to deter European producers from moving to nations with subpar environmental regulations. This move ensures that European businesses don’t suffer competitively while they channel investments to achieve the EU’s goal of slashing net emissions by 55% from 1990 benchmarks by 2030.
For now, firms across the EU, Britain, and Ukraine anticipate minimal disruptions during this experimental phase. The European Commission has ascertained that this border tariff complies with World Trade Organization stipulations, promising equal treatment to both domestic and foreign entities.
Reiterating the core intent behind CBAM, Gentiloni stated, “It is about safeguarding the EU’s climate goal and aiming to elevate global climate commitments.” The European steel association, Eurofer, expects the early phase to evaluate the CBAM’s robustness against possible industrial production shifts to nations with lenient climate mandates.
Key trading allies, including China, Turkey, and the U.S., have abstained from commenting on this development.