The tariff will apply to imports of iron, steel and aluminum

On December 13, the European Union reached a political agreement on a new border tariff on carbon emissions (CBAM) for the import of goods, in particular, steel and cement. This is the first scheme in the world aimed at supporting European industry during the decarbonisation process, reports Reuters.

Negotiators from EU countries and the European Parliament reached an agreement on the law on the introduction of CO2 emission costs for the import of pig iron and steel, cement, fertilizers, aluminum and electricity. Companies importing these goods into the EU will be required to purchase certificates covering the CO2 emissions associated with production.

The scheme is designed to apply the same price to CO2 emissions for foreign producers and European industry. Europe’s polluting producers are already required to buy permits in the EU’s carbon market (ETS).

Mohammed Chahim, European Parliament’s lead negotiator on the law, said, that this is one of the existing mechanisms the EU has to encourage trading partners to decarbonize their industries.

The purpose of the tariff is to prevent the destruction of European industry by cheaper imports from countries with weaker environmental regulations. The negotiators also agreed to extend the scheme to import hydrogen, which was not included in the original proposal.

Some details, including the date of entry into force, will be discussed later this week as part of the relevant negotiations on the reform of the EU carbon market. Currently, the European Union provides its industry with free permits for CO2 emissions, but plans to phase them out and gradually introduce a border tariff.

Brussels has said that countries can be exempted from the border tariff if they implement a climate policy similar to the European one. In particular, this may apply to the United States.

CBAM is part of the EU’s efforts to prevent climate change. The goal of the European Union is to reduce emissions by 55% by 2030 compared to the level of 1990.

As GMK Center reported earlier, the Association of European Steel Producers (EUROFER) and the trade association European Aluminum together with other sectors called for gradual implementation of carbon tax on imports. In particular, industry has emphasized that ETS and CBAM are key elements needed to achieve climate neutrality. In addition, a cautious approach to phasing out the free allocation of carbon emission allowances is needed, as the new mechanism (CBAM) still needs to be tested.