European Union agreement to create a carbon border tax: a first

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European Union agreement to create a carbon border tax: a first

This agreement shall apply among others to iron and steel, cement, aluminium, fertilizers and electricity.

The European Union (EU) on Tuesday sealed a political agreement on the establishment of a mechanism to apply to imports of polluting products (such as steel or cement for example) the rules of the European carbon market, which requires European manufacturers to buy carbon dioxide (CO2) emission quotas, in other words “rights to pollute”.

After a night of negotiations, the negotiators of the EU-27 and the European Parliament managed around 5 a.m. (Monday 11 p.m. EDT) to conclude an agreement on a European carbon border adjustment mechanism which will take effect. will apply to iron and steel, cement, aluminum, fertilizer and electricity, but also hydrogen or some end products like screws and bolts , for example.

This mechanism, the first of its kind, should in particular make it possible to avoid the relocation of manufacturing production from the EU to countries with less demanding standards.

The mechanism of Carbon border adjustment will be a crucial pillar of European climate policies. This is one of the only mechanisms we have to encourage our trading partners to decarbonize their manufacturing industry, underlined the MEP rapporteur for this text Mohammed Chahim, quoted in a press release from the European Parliament.< /p>

These new rules will apply from October 1, 2023, with a transition period during which importers will only be obliged to report emissions related to the production of the imported product.

The effective date of the device – with the importer's purchase of a certificate to align with the price of carbon allowances in the EU – will be set later this week, as part of ongoing negotiations on the more comprehensive reform of the EU carbon market.

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