EU Finalizes Plan For A Carbon Border Tax

In an effort to avoid being undercut by cheaper goods made in countries with weaker greenhouse gas emission rules, last week a panel from the European Union (EU) reached a preliminary agreement to impose a carbon tax on imported goods. On December 18, EU member states settled on the specifics of the tax.

Under the plan, which will take effect in 2026, companies that import products such as steel and iron would be required to buy certificates to cover all of the carbon dioxide emissions associated with the production and sale of their goods, including transportation. As Politico noted, the provision includes indirect emissions, or the carbon pollution from the electricity used to manufacture the imported goods.

The bulk of emissions from certain goods, such as aluminum, comes from the huge amounts of electricity used in production.

As would be expected, U.S. manufacturers are worried the protectionist plan will make it more challenging to export goods to Europe. High-emitting developing countries in particular have expressed frustration. The United Kingdom and Canada also are considering their own border adjustment taxes, and Democratic lawmakers in the U.S. Congress have proposed a similar border tax system.

Stay tuned to Connecting the Dots as news on these proposals develops.