The member states of the European Union( EU) have agreed to implement a system that will levy a charge on imports of items that cause pollution, including cement, aluminum, power, iron, fertilizers and steel.
The Carbon Border Adjustment Mechanism (CBAM) program, a first-of-its-kind, aimed at assisting European industry in their decarbonization, will cover industrial imports from the 27 member states of the regional bloc, prioritizing the highest polluting goods.
In order to conceal their inherent CO2 emissions, companies importing those goods into the EU will need to purchase certifications. The program’s goal is to make local EU industries, which are currently compelled to purchase permits from the EU carbon market when they pollute, and foreign companies that operate to pay the same price for CO2 emissions.
“CBAM will be a crucial pillar of European climate policies,” said Mohammed Chahim, a member of the European Parliament from the Netherlands, in a statement released by the parliament.
“It is one of the only mechanisms we have to incentivise our trading partners to decarbonise their manufacturing industry,” he said.
The tax is intended to protect European industries from being outcompeted by less expensive products from countries with weak environmental regulations.
Later this week, as part of negotiations connected to a reform of the EU carbon market, the specifics on the law, including its start date, will be decided.
During the agreement’s test period, which will start in October 2023, importing companies will be required to submit their carbon emission commitments.
In order to protect domestic industry from foreign competition, the EU currently provides free CO2 permits. However, in order to comply with World Trade Organizations(WTO) regulations, the EU plans to phase out these free permits once the carbon border tariff is implemented. The discussions surrounding the carbon market will determine how swiftly that phase-in occurs.
The tariff is a component of an EU policy package aimed at preventing catastrophic climate change by reducing EU emissions by 55% from 1990 levels by 2030.
Author- Roberta Appiah
