What will the carbon tax be like at the EU border
The carbon tax at the border is the cornerstone of Brussels' attempt to protect European industry from foreign competitors not subject to stringent climate targets. The in-depth analysis of the Financial Times
Brussels expects to raise nearly € 10 billion a year from a carbon tax on imports as part of its effort to tackle global warming and will use the money to repay hundreds of billions of common EU debt recovery debts.
Details of the EU's upcoming Carbon Border Adjustment Mechanism (CBAM), reported in a legal text, seen by the Financial Times, reveal how the system will work. The so-called carbon border tax forms the cornerstone of Brussels' attempt to protect European industry from foreign competitors that are not subject to the bloc's stringent climate targets.
Documents show that the mechanism will raise around € 9 billion a year in revenue once it is fully operational by 2030. The European Commission intends to introduce the tax gradually starting in 2023 to allow businesses a period of "transition" to adapt and guarantee "the least possible burden on commercial flows and commercial operators", the text reads.
European industry, especially steelmakers, want the instrument to go into effect as soon as possible, so that they don't have to bear the burden of paying a rising carbon price in the EU while competitors outside the EU. group do not.
The European Commission will unveil measures next Wednesday to help meet its target of reducing the EU's average carbon emissions by 55% in 2030, compared to 1990 levels. In addition to CBAM, it includes a renewal of the carbon market in the EU. 'EU, stricter CO2 emission standards for cars and proposals for a kerosene tax across the EU.
But it is the CBAM that has caused the most concern from the EU's trading partners, led by Russia, who fear they are most affected.
The revenues of the CBAM have been earmarked to help cover the cost of the EU's € 750 billion recovery fund, money that Brussels has borrowed to help its member states revive their economies in the wake of the pandemic.
Although it is a relatively modest amount, the money has been backed by the European Parliament and by countries like France who want Brussels to generate its "own resources" to pay off the debt collection fund over the next few decades.
The money is likely to take on additional meaning after the European Commission's plans for an EU digital tax are delayed due to Washington's concern that the tax is incompatible with ongoing negotiations for a comprehensive tax deal.
CBAM has been advocated as a way to prevent so-called 'carbon leakage', where companies can move their operations outside the EU to avoid strict climate regulations.
The tax would initially target a limited number of imports including iron, steel, cement and fertilizers. According to internal EU estimates, Russian companies will make up the bulk of the revenue due to the high carbon intensity of their imports.
"As the EU increases its climate ambitions, the divergence with the level of climate action of third countries is expected to increase, with a greater risk of carbon leakage for the EU," the text reads.
Europe's trading partners have warned that the mechanism must not be contrary to the rules of the World Trade Organization. EU officials say they are confident that the tool will not risk retaliatory action as it is designed to target companies and not countries and will only apply to nations that do not have equivalent carbon pricing systems.
CBAM is also designed to complement a revamp of the EU Emissions Trading System (ETS) where European industry pays a market-driven carbon price to cover the cost of their emissions. The Commission said it will phase out free carbon credits in the ETS for sectors such as aviation and then introduce CBAM to protect businesses from rising costs and competition.
Officials said the final text would be subject to change before being adopted by the committee next week.
(Extract from the foreign press review by Epr Comunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/tassa-sul-carbonio-alla-frontiera-europa-10-miliardi-euro/ on Sun, 11 Jul 2021 06:00:36 +0000.