EU launches phase 1 of its plan to tax carbon at its borders

Wired magazine says it could be “the most important climate policy you have never heard of.”

EU launches phase 1 of its plan to tax carbon at its borders
Photo by Christophe Dion / Unsplash

Since 2005, the EU has levied a carbon price on polluting industries within its own borders, requiring manufacturers to buy credits to cover the carbon they emit or risk heavy fines. Now, as of October 1st, they have initiated the first stage of applying a carbon tax on imported products coming into the region – a move that could push industries in other countries to clean up their production if they want access to lucrative EU markets.

“This is an excellent example of wild ambition on the regulatory front,” says Emily Lydgate, a professor of environmental law at the University of Sussex, quoted in this Wired magazine article. "It’s very novel to roll this out in such a big market. The perturbations throughout the system are pretty huge.”

Phase one of the Carbon Border Adjustment Mechanism (CBAM) kicked off October 1st and requires companies within the EU to declare the embedded emissions associated with imported goods that are covered under the legislation (such as high-emissions products such as concrete, steel, iron, and fertilizers), but they won’t have to purchase any carbon allowances until phase two launches in 2026.

The idea behind the CBAM is to level out the carbon playing field and ensure that polluting industries in the EU won't just move to countries with less stringent carbon regulations. It will be interesting to see how the rest of the world reacts.

You can read the full article here.

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