World’s first CO2 emissions tariff to be introduced in the EU by 2026

March 27, 2022
Climate Change
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Countries in the EU back the bloc’s decision to impose a world-first carbon dioxide emissions tariff on imports of polluting goods.

The finer details of the plan still nee to be specified in upcoming negotiations.

So what would the tariff mean? The EU wants to introduce CO2 emissions costs on imports of steel, cement, fertilisers, aluminium and electricity, from 2026. This is a move aimed at protecting European industry from being undercut by cheaper goods made in countries with weaker environmental rules.

A three-year transition phase for the levy would begin in 2023, so EU countries and the European parliament are racing to approve the rules this year. Finance ministers from EU countries on Tuesday agreed on their negotiating position.

“It’s a major step forward in the fight against climate change,” French finance minister Bruno Le Maire said after the ministers’ meeting in Brussels, adding that a “sizeable majority” supported the position.

“We’re making the effort to reduce carbon emissions in industry. … We don’t want these efforts to be of no avail because we import products which contain more carbon,” Le Maire said.

The CO2 emissions tariff is part of a wider green plan

The levy is part of a package of EU climate change policies designed to cut the bloc’s emissions by 55 per cent by 2030 from 1990 levels.

That goal will require huge investments from industry in green technologies like hydrogen and impose higher CO2 costs on polluters. The border levy aims to create a “level playing field” by imposing the same CO2 costs on EU companies and those abroad.

France, which currently chairs meetings of EU ministers, has long supported the levy and prioritised a swift deal on it. European parliament plans to confirm its position by July, meaning negotiations between parliament and EU countries on the final rules could begin after summer.

However, ministers have not yet decided how quickly the border levy should replace the free CO2 permits industries currently receive under the EU carbon market. The phasing out of those permits is contentious, and ministers said it would be negotiated in separate talks on EU carbon market reforms.

The issue of whether revenue from the CO2 levy will go into the EU budget will also be discussed later.

“The agreement leaves many questions unanswered,” said Parliament’s lead lawmaker on the policy, Mohammed Chahim, adding that he “cannot make any deal” without clarity on the free permit phase-out.

Chahim wants to end free CO2 permits by 2028. The commission proposed 2035, while some industries are lobbying to keep them.

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