Regulation: EU Reaches Agreement on Carbon Border Tax

Environmental regulators and ministers from across the EU member states provisionally approved the introduction of the world’s first major carbon border tax, the Carbon Border Adjustment Mechanism (CBAM), which will require foreign exporters to the EU to pay for the cost of their carbon emissions. Imports into the EU of iron, steel, cement, aluminum, fertilizer, electricity generation, hydrogen and certain iron and steel products will be subject to the tax. The costs of carbon emissions for purposes of the tax would be calculated based on the actual Scope 1 and Scope 2 emissions that occur in the production of goods—defined as “embedded emissions.” If actual emissions cannot be verified, the embedded emissions will be determined by the “default value,” which is “based on the average emission intensity of the 10 per cent worst performing EU installations for that type of goods.” It is anticipated that the European Council and European Parliament will formally approve the CBAM, which will then become EU law. The tax will phase in gradually, with exporters initially having to provide emissions data starting on October 1, 2023. Peter Liese, lead negotiator for the European parliament, stated that the CBAM was “the biggest climate law ever in Europe, and some say in the world.”-- More...