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EU passes carbon import tax on the road in 2026

Updated: Dec 1, 2023

The European Parliament voted on the 18th to pass a number of bills to reform the EU's climate policy, including revising the carbon trading market mechanism and increasing the cost of pollution in Europe. In addition, the world's first carbon import tax legislation was approved, and carbon taxes will be levied on high-carbon-emitting products imported into the EU from 2026. This is the first time that climate norms have been incorporated into global trade rules.



The vote on the 18th brought an end to nearly two years of carbon import tax negotiations. The negotiations aim to urge the world's major economies to put a price on carbon dioxide emissions; to protect EU manufacturers from the threat of price-cutting competition from rivals in highly polluting countries; and to reduce the incentive for EU companies to move production capacity to areas with loose environmental regulations.


This EU legislation, which is unique in the world, will gradually impose taxes on high-carbon-emitting goods imported into the EU starting from 2026, initially targeting steel, cement, aluminum, fertilizers, electricity and hydrogen.


For countries that implement carbon pricing, the EU will provide carbon tax credits. If EU importers have paid carbon emission charges overseas for goods imported, they can be deducted when paying the carbon border tax.


The EU's legislation to impose a carbon tax has aroused concern in the United States, which worries that it will frequently add cumbersome procedures to American companies seeking to export goods to Europe. The EU's carbon tax has also drawn criticism from developing countries including China. These countries have always had higher carbon emissions than their European counterparts and are more reliant on coal-fired power generation.


Other countries are under pressure to follow suit, with Brexit Britain debating whether to introduce a carbon border tax. Democrats in the U.S. Congress have also proposed legislation to impose a carbon tax, an idea that is gradually gaining bipartisan support.


The European Parliament also voted on Tuesday to reform the carbon trading market agreement reached last year, aiming to reduce European carbon emissions by 62% by 2030 compared with 2005 levels.


Europe's Emissions Trading System (ETS), launched in 2005, forces power plants and factories to purchase carbon rights when they produce pollution. Since its implementation, carbon emissions from related industries have been reduced by 43%.


In addition, by 2034, European factories will lose the free carbon rights currently obtained; in addition, from 2024, shipping carbon emissions will also be included in the carbon market mechanism.


The price of EU carbon rights reached 94 euros per ton on the 18th, a nearly three-fold increase since the beginning of 2020, and reached 100 euros for the first time in February.


The European Parliament on Tuesday also supported the creation of a new carbon trading market for carbon emissions from fuel used in cars and buildings by 2027.


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