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EU wants world-first carbon border levy to hit more sectors after 2030

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September 9, 2021

By Kate Abnett

BRUSSELS (Reuters) – The European Commission plans to expand the EU’s carbon border tariff to cover more sectors and products after 2030, subjecting more international trade to the world-first policy, a senior Commission official said on Thursday.

The Commission, which drafts EU policies, in July published its proposal for a carbon border tariff, designed to ensure that foreign manufacturers do not gain a competitive advantage over EU companies as the bloc toughens its climate change policies.

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The proposal would charge importers a fee at the EU border from 2026, based on the CO2 emitted in making their products abroad. It would cover cement, iron and steel, aluminium, fertilisers and electricity.

Gerassimos Thomas, director general of the Commission’s tax department, said more sectors would be added later.

“We will expand the sectors and the products post-2030,” Thomas told a European Parliament committee meeting on Thursday, adding that “downstream products” would also be targeted.

That could see the levy apply to assembled products such as cars, rather than just the steel used to make them.

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For each new sector the Commission would assess trade flows, the value of goods and the administrative burden of introducing the border levy, Thomas said.

“We plan to widen the scope, but we will remain within the sectors at risk of carbon leakage,” he said.

Carbon leakage is the risk that companies relocate to regions with weaker environmental regulations and continue to pollute there, instead of making investments to cut their emissions.

That risk is expected to increase as the EU strives to meet its target to cut its net emissions 55% by 2030, from 1990 levels.

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The EU counts around 60 industrial sectors to be at risk of carbon leakage, including refineries and manufacturers of ceramics and glass.

EU member countries and the European Parliament must negotiate the details of the carbon border levy before it takes effect. Those negotiations could take up to two years.

(Reporting by Kate Abnett; editing by David Evans)

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