by The EU wants to reduce greenhouse gas emissions by at least 55% by 2030, compared to 1990.
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Plans for the European Union’s carbon border adjustment mechanism took a significant step forward on Tuesday morning after a tentative deal was reached between the EU Council and members of the European Parliament.
In a statement, Parliament said the CBAM tax would be set up “to equalize the carbon price paid for EU products operating under the EU Emissions Trading System (ETS) and that for imported goods”.
According to plans, companies importing into the EU will have to buy “CBAM certificates”. These will be used to offset the difference “between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS,” the statement said.
The CBAM will cover a range of goods and sectors such as electricity, fertilisers, aluminium, cement, steel and iron. It has also been expanded to include hydrogen and other products such as bolts and screws.
“Only countries with the same climate ambition as the EU will be able to export to the EU without buying CBAM certificates,” said Tuesday’s statement, adding that the plans were designed to fully comply with World Trade Organization rules .
The new rules, he said, “would ensure that EU and global climate efforts are not undermined by the transfer of production from the EU to countries with less ambitious policies”.
The European Parliament statement described the new bill as “the first of its kind”. It will apply from October 2023, with an integrated transition period.
In practice, the plan means that countries not aligned with EU climate targets would be forced to cut emissions if they want to export goods to the EU, or rack up extra cash for certificates.
“CBAM will be a crucial pillar of European climate policies,” said Mohammed Chahim, Member of the European Parliament. “It’s one of the few mechanisms we have to incentivize our trading partners to decarbonise their manufacturing industry.”
In its statement, the EU Council (government ministers of each EU country) said Tuesday’s deal still needs to be confirmed by the European Parliament, EU member states’ ambassadors and then “adopted by both the institutions before it is final”.
CBAM is a significant cog in the EU’s broader goal to reduce greenhouse gas emissions by at least 55% by 2030, compared with 1990.
Plans for the mechanism have previously drawn the ire of major economies such as China. The CBAM is also being formulated at a time when the EU has expressed concern about the US Inflation Reduction Act.
