BRUSSELS – The European Union starts the initial phase of its plan for the world’s first carbon border tax next month, requiring importers to report the CO2 emissions of products sold into Europe, such as steel and cement, or risk financial penalties.
The aim of the new regime is to prevent domestic EU industries from being undercut by more-polluting foreign competitors, while they invest in reducing emissions.
Once it is fully in force from 2026, imports into the EU will pay a CO2 fee equal to what European companies already pay in Europe’s carbon market.
Turkey, Ukraine, China and Russia are expected to have the biggest volumes of exports affected by the CO2 tax – although EU trade with Russia has plunged since the Ukraine conflict.
Industries in Europe, Ukraine and Britain said they expected little initial impact, but warned of potentially significant fallout when the full CO2 levy launches in 2026.
From October, the CO2 levy’s trial phase will require companies importing steel, cement, aluminium, electricity, fertilisers and hydrogen into the EU to report the emissions involved in producing those goods.
Companies will face penalties of up to €50 per tonne of CO2 if they don’t report. From 2026, there will be a CO2 fee applied to goods brought into the EU.
A UK Steel spokesperson said it is not expecting a significant impact in the initial reporting phase.
A spokesperson for ArcelorMittal Kryvyi Rih, steelmaker ArcelorMittal’s Ukraine subsidiary, said it had “almost all” the data ready to comply.
“However, questions arise regarding the cost of this adaptation and the competitiveness of Ukrainian products in 2026,” the spokesperson said, citing companies’ limited ability to invest in decarbonisation during wartime.
The border fee won’t apply to imports from countries with a CO2 price equal to the EU’s. That could benefit Ukraine, which is aligning its climate policies with the EU’s, as it bids to join the bloc.
The EU levy also allows exemptions for countries facing unprovoked situations that destroy infrastructure.
“It will be assessed in due time whether this clause can effectively address the exceptional situation of Ukraine,” a European Commission official said.
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