By Nikos Avlonas, President of CSE
The European Commission has recently announced plans for a new carbon border adjustment mechanism (CBAM), or well know as Carbon Border Tax which would levy charges on non-EU products in relation to their embedded carbon footprint. The mechanism will be phased in gradually from 2026 and will initially apply only to a selected number of goods such as iron and steel, cement, fertilizer, aluminum and electricity generation. The Carbon Border Tax included in the ‘Fit for 55’ package of proposals as part of the EU’s Green Deal.
The mechanism is designed to ensure that European emission reductions contribute to a global emissions decline, instead of pushing carbon-intensive production outside Europe. It also aims to accelerate global climate action and encourage other countries to introduce similar mechanisms.
While Carbon Border Tax is designed also for protecting European industries from competitors abroad the proposal has caused great concern in Russia as its industries are expected to be affected. US government has also expressed a concern as the mechanism will burden the cement, fertilizer, steel, iron, coal and electricity industries. The idea has also received a hostile reception from China.
Especially Russia has calculated that it is expected to lose $7.6bn from it, making Moscow potentially one of the biggest losers from the measures. It is Europe’s biggest supplier of carbon-intensive products, worth an estimated €10bn in 2019. Total EU imports from Russia amounted to €145bn in 2019, making Russia the EU’s fifth-largest trading partner.
While observing the EU’s new moves, US advocated this week a carbon border tax, even though the country lacks a national carbon pricing mechanism. Climate policy is increasingly becoming interwoven in trade policy and countries are serious about trying to decarbonize these industrial sectors.
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