The EU proposes a carbon tax at borders, a world first
A new EU proposal could well change the way companies source certain resources.
The reasons
This border tax should be introduced gradually from 2026, and would concern imports of steel, aluminum, cement, fertilizers and electricity with high carbon emissions. The aim is for Europe to achieve its new climate objectives and to protect European industries from foreign competitors. Indeed, some can produce at lower cost because they are not charged for their carbon output.
Therefore, a transitional phase starting in 2023-25 will require importers to monitor and report their emissions through the purchase of digital certificates representing the tonnage of CO2 emissions. As a reminder, carbon prices in the EU, on which the price of certificates will be based, have reached record levels of over €58 per ton this year.
A difficult context
Most analysts expect prices to continue to rise through 2030, spurred by the prospect of reforms that the Commission has also proposed to meet climate change targets. Some 64 carbon pricing instruments are in use around the world, including in China and some U.S. states, including California. But they cover only 21 percent of global greenhouse gas emissions, according to a May report by the World Bank. Prices under these schemes also vary widely. The commission has said the border carbon measure would be consistent with World Trade Organization rules, but the idea has received a hostile reception from trading partners, including China and Russia.
However, the tax remains a way to regulate unbridled globalization, and opting for more eco-responsible sourcing seems to be the way to go in the coming years. Companies are more and more subject to CSR standards and consumers are more and more careful about the origin of their products. This tax is ultimately an interesting tool in the battle against global warming, and companies should reconsider their sourcing choices.
