Analysis: EU industry hands Brussels headache over carbon border levy



Kate Abnett | Reuters

Brussels policymakers, about to unveil the world’s first carbon border levy, are caught between industry demands to twin it with free carbon permits worth billions of euros, and analysts’ warnings that doing so could expose the EU to legal challenges at the WTO.

As part of a package of climate policies, including carbon market reforms, the European Commission will next month publish its plan to impose a carbon border adjustment mechanism (CBAM) or CO2 tariff on polluting goods, forcing some companies importing into the European Union to pay carbon costs at the border.

The idea is to prevent carbon leakage – or the phenomenon of European firms relocating to countries with less costly climate standards – by levelling the playing field between production in Europe and potentially cheaper but more polluting manufacture of products such as steel and cement elsewhere.

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