EU mulls expansion of carbon import levies
Commission consults on updated Carbon Border Adjustment Mechanism as Turkey introduces ETS
The European Commission has launched a consultation on extending the Carbon Border Adjustment Mechanism (CBAM), and wants to refund carbon payments for EU exporters.
On Tuesday, policymakers opened a call for feedback on whether certain downstream products should be subject to EU import fees under the law.
CBAM was established to make things fairer for companies that pay for their pollution under Europe’s Emissions Trading System (EU ETS) and therefore face a competitive disadvantage against peers in countries without an equivalent carbon price.
Essentially, it adds a tariff onto certain goods sold into the bloc from those countries.
It covers the cement, iron, steel, aluminium, fertiliser, electric and hydrogen industries, but this week’s consultation explores the potential to add products further along the value chain – probably starting with those associated with steel and aluminium.
The consultation, which is open until August 26th, also addresses challenges around carbon accounting.
CBAM uses default emissions values that don’t factor in how decarbonised different third-country grids are.
To tackle this, the Commission is considering either changing the current default calculation or making it easier to use actual emissions values.
In addition, the consultation explores ways to close loopholes that allow companies to circumvent CBAM by doing things like altering the make-up of aluminium so it qualifies as ‘scrap’ and consequently falls out of scope of the rules.
“This consultation covers the most important topics for the future of CBAM,” said David Cruz Fernandez, a sustainability expert at Oslo-based consultancy Cemasys.
“The Commission will be paying close attention to the feedback as they redesign the regulation at the end of the year.”
On Wednesday, policymakers also revealed plans to refund emissions-related fees incurred by EU exporters, as part of the new Clean Industrial Deal.
“CBAM puts a carbon price on imports, but there is still a pricing problem for European companies exporting products covered by the EU ETS,” explained Cruz Fernandez.
“This proposed new measure will protect those exporters until the review of the new ETS in 2027.”
The measure is likely to be financed by revenues generated from CBAM, he added.
A formal proposal will be tabled by the end of the year.
Turkey responds to CBAM
Elsewhere, Turkey approved a national ETS of its own this week, which it hopes will shield its domestic manufacturers from CBAM tariffs.
It will be piloted this year, with a full roll-out in 2026, to coincide with CBAM.
“From the beginning, CBAM was intended to encourage decarbonisation in third countries,” said Cruz Fernandez.
“This move from Turkey has proven that it’s starting to achieve that to some extent.”