European Union: new carbon tax on imported goods approved yesterday, among others

Yesterday April 25 2023, the European Council - whose vote is the last step of the European Union's (EU) decision-making process - adopted five laws that will enable the EU to cut greenhouse gas emissions within the main sectors of the economy. A EUR 65 billion Social Climate Fund was also created to support the most vulnerable citizens and micro-enterprises, as well as the sectors exposed to carbon leakage, in their effective climate transition.

Among the new approved laws, a carbon tax on imported goods, the Carbon Border Adjustment Mechanism (CBAM), and an update to the EU emissions trading system (EU ETS). Here are the details.

1) CBAM. Until the end of 2025 the CBAM will apply only as a reporting obligation. Then phased in gradually. Special treatment for sectors such as cement, aluminium, fertilisers, electric energy production, hydrogen, iron and steel. If you missed our important post about CBAM from December 14 2022 (day of the semifinal match between France and Morocco at the FIFA World Cup Qatar) here is it for you.

2) EU ETS. The carbon market based on a system of cap-and-trade of emissions allowances for energy-intensive industries, the power generation sector and the aviation sector. The new rules increase the overall ambition of emissions reductions.

3) Maritime transport emissions. Included within the scope of the EU ETS for the first time. Depending of ship size, gradual process. All emissons - CO2, methane and N2O - considered.

4) Buildings, road transport and other sectors proven difficult to decarbonise. A new, separate emissions trading system has been established. And will depend on oil and gas prices.

5) Emissions from aviation. Free emission allowances will be gradually phased out and full auctioning from 2026 will be implemented. 20 million allowances reserved until 31 December 2030 as an incentive. EU ETS for intra-European flights and CORSIA to extra-European.

Click at the image below for the full Press Release by the European Council and all specific supporting documentation.

Still about CBAM, it intends to "promote the import of goods by non-EU businesses into the EU which fulfil the high climate standards applicable in the 27 EU member states. And ensure a balanced treatment of such imports, designed to encourage the EU’s partners in the world to join the EU’s climate efforts".

The laws will now be signed by the Council and the European Parliament and published in the EU’s Official Journal before entering into force.

#climate

#economy

#taxation

#europe