The EU’s carbon border tax hits roadblocks

The European Commission’s Fit-for-55 emission plan, with its extended emission trading scheme and the new carbon border tax, will be fighting an uphill battle. The carbon border tax scheme — the first of its kind in the world — could become Europe’s opening bid to get moving internationally beyond mere discussions. If there is an international agreement in the end, it would have served a purpose. If not, it may only end up creating new battle lines between trading partners. There may be broad consensus on the goal of reducing carbon emissions, but questions remain: who is to shoulder the bill?

The carbon border adjustment mechanism, CBAM, is expected to be levied on imports of iron and steel, cement, aluminium, fertilisers and electricity. The scheme is meant to start in 2026, with a dry run from 2023 onwards. The Commission says the system will be WTO-compatible and fair, requiring importers to buy emissions certificates at the same price as domestic producers.