The European Union is adopting a “carbon tax” at its borders to make its industrial imports greener

A coal-fired power plant in Shenyang, Liaoning province, China, Sept. 29, 2021.

This is one of the most important measures to accelerate the decarbonisation of industry in the Old Continent. The European Union (EU), meeting in trilogue on Tuesday 13 December, agreed on the main features of its Carbon Border Adjustment Mechanism (MACF), a system that is unique in the world. It will make it possible to tax imports of goods from third countries with lower environmental standards in the most polluting sectors (steel, cement, fertilizers, etc.). The idea is to prevent “ecological dumping” or what is known as “carbon leakage” – where manufacturers would move production outside of Europe – while encouraging the rest of the world to step up their efforts to reduce greenhouse gas emissions .

“The EU is the first trading area in the world to put a carbon price on its imports. We’ve been talking about it for over twenty years. This is a historic deal for the climate.” welcomes Pascal Canfin, Renew MEP and Chair of the European Parliament’s Environment Committee.

The agreement between the Commission, the Member States and Parliament does not resolve all the thorny issues. The main outstanding issues in this file, which are closely related to the reform of the carbon market, will be discussed in another trilogue on Friday and Saturday. All of these measures are part of the extensive legislative arsenal (“Fit for 55”) currently being negotiated to enable the EU to meet its climate targets: to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels to achieve carbon neutrality by 2050.

Part of the functioning of the carbon adjustment mechanism has now been established. The system will cover imports from the five sectors considered to be the most polluting (steel, aluminium, cement, fertilizers, electricity), proposed by the European Commission, extended to hydrogen, as requested by the European Parliament. By 2030, the MACF will be extended to all sectors at risk of carbon leakage, based on a list to be established by the Commission. For example, MEPs wanted plastics or organic chemicals to be covered.

Almost 60% of EU emissions covered

In the near future it will be almost 60% industrial emissions from Europe covered by the mechanism. The issue of processed products will be addressed through a new legislative proposal one year before the effective entry into force of the MACF. “This is an essential part of the agreement reached, as it means that the potential problem, the risk of relocation, will be resolved before entry into force”, approves Pascal Canfin. Indeed, there is currently a loophole. “If a car manufacturer imports steel from Turkey to Europe, it pays the MACF. But if he imports a Turkish steel car made in Morocco to Europe, he will not pay for it.”he illustrates.

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