Impose a Carbon Price to Avoid a Levy, EU Urges Trading Partners
- Constant Tedder
- Mar 25, 2021
- 2 min read
The EU has called on its international trading partners to impose a carbon price to help them avoid a new carbon import levy planned by the bloc.
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What is Happening?
The so-called Carbon Border Adjustment Mechanism is part of the European Green Deal, which aims for Europe to reach climate neutrality by 2050.
The European Commission is looking to propose in June a measure that penalises emissions embedded in some goods brought into the bloc, like cement, steel, fertilisers and power.
EU Economic Affairs Commissioner Paolo Gentiloni says that nations need to accelerate their climate ambitions before the COP26 talks in Glasgow this November.
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He says, “We need to build on such a global trend to set up joint approaches with like-minded international partners, including by introducing equivalent carbon pricing mechanisms.”
The EU plans to toughen its 2030 emissions-reduction target to at least 55% from 1990 levels. The new import levy would help avoid carbon leakage, a phenomenon where producers move to regions with more lenient pollution rules. However, there are concerns that companies will relocate their production abroad.
Free pollution permits that the EU currently hands out to some companies to protect them from carbon leakage are no longer enough to reach the bloc’s climate goals, highlighting the need for a more effective instrument, such as a border levy.
For the carbon border adjustment mechanism, the European Commission is considering implementing a tool that would operate similarly to the EU Emissions Trading System. In such a system, importers of emissions-intensive goods would have to pay a charge linked to the price of allowances in the bloc’s carbon market.
Gentiloni says, “Importers will not be subject to an adjustment that is higher than what applies to domestic EU producers. The Commission is also reflecting on possible ways to support less developed countries.”
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