Europe to launch first carbon import tax to curb emissions, stop leakage

The European Union will launch its first import tax on steel, cement, aluminium and more to reduce emissions and prevent companies from shifting production abroad

The European Union (EU) is set to launch the carbon border adjustment mechanism (CBAM) in the next three months, a border tax on carbon-intensive imports. Starting January 1, 2026, the policy will apply to goods such as steel, cement, fertilisers, aluminium, and hydrogen imported into the 27-nation bloc, CNBC reported.

 

The CBAM aims to reduce greenhouse gas emissions, encourage cleaner production globally and prevent “carbon leakage”, where companies move production to countries with weaker climate rules.

 

How it works

 

Importers will need to purchase CBAM certificates to cover the emissions associated with their goods. Prices for these certificates will match the EU Emissions Trading System (ETS) market rates. The tax is designed to put a fair price on carbon emissions and help EU companies compete on a level playing field, the news report said.   

 

 

Opposition against carbon border tax

 

Not all countries are on board. The US, China, India, Brazil and Russia have raised concerns. Some have threatened retaliation, while others argue the policy could hinder global climate efforts.

 

The US has warned the EU that its climate rules could affect trade agreements. India has said high-income nations should reduce emissions first, while China, Brazil, and Russia have raised issues at UN climate talks and with the World Trade Organisation (WTO).

 

A step toward broader climate action

 

The EU’s von der Leyen, in a 2019 manifesto to become European Commission president, said she intended to introduce a carbon border tax “to avoid carbon leakage” and help EU companies.

 

EU leaders see CBAM as a step toward broader climate action. Commission President Ursula von der Leyen first proposed a border carbon tax in 2019 to prevent carbon leakage and help EU companies “compete on a level playing field".

 

The CBAM is part of the EU’s plan to cut emissions by at least 55 per cent by 2030. Success could depend on whether other countries implement similar carbon pricing systems, potentially creating a global standard for clean trade, the news report said.