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EU countries have agreed to extend the bloc’s carbon border tax to almost 400 new types of steel and aluminium imports in an effort to stop circumvention of the levy.
The move is part of the EU’s attempt to retain industrial capacity and a competitive edge at the same time as pursuing decarbonisation to deal with greenhouse gases, which comes at higher costs for European industry.
The EU’s carbon border adjustment mechanism, which came into force at the start of the year, obliges importers of steel, aluminium, iron, cement and fertilisers, as well as electricity and hydrogen imports, to pay for their CO₂ content.
It is designed to protect European producers from cheap imports that do not have to pay for their emissions, while those in the bloc must acquire allowances to emit carbon under its cap-and-trade system.
The European Commission last year proposed to extend the levy to 180 downstream products that contain significant amounts of steel or aluminium, such as forklifts, washing machines and garden tools, to prevent companies getting around the levy by simply turning steel or aluminium into a more finished product before importing it into the EU.
EU countries have added an additional 200 types of goods to that list, which is estimated to impact €160bn worth of annual imports. They will now enter into negotiations with the European parliament before the revised product list applies from 2028.
EU commissioner Wopke Hoekstra hailed its progress. “This is truly excellent news for beefing up the level playing field. Industry has rightfully asked for these fundamental changes. We are delivering on them quickly,” he told the FT.
France obtained a carve-out for cement and heavy construction materials for the overseas territories of Mayotte and Réunion, islands located in the Indian Ocean.
This was based on the argument that there was no economically viable way of bringing EU-produced cement and steel to these remote areas, and also no real risk of circumvention of the EU carbon border from exempt imports travelling from there into the bloc.
The carbon levy has raised protests from a variety of exporting countries. The developing economy of Mozambique, which relies on its large aluminium trade with the EU, has argued that it places a significant burden on poorer countries by threatening their key exports and redirects revenues to Europe instead of helping to finance decarbonisation and development in weaker nations.
Consistent with its blocking tactics at international climate talks, Russia has also challenged the levy as well as the bloc’s cap-and-trade carbon market at the WTO in Geneva over what it says are disguised trade restrictions.
But EU officials have countered that the policy has a positive effect on third countries’ carbon clean-up, by providing incentives to invest in greener production.
