European Parliament backs carbon border tax plan

Published Thu, Mar 11, 2021 · 07:03 AM

[BRUSSELS] The European Parliament on Wednesday overwhelmingly endorsed the creation of a carbon border tax that would shield EU companies against cheaper imports from countries with weaker climate policies.

The non-binding vote was an early step in a long path to setting up the tax plan, which faces a very difficult ratification with opinions widely diverged among the bloc's 27 member states.

The border tax is seen as a key part of the EU's Green Deal, an ambitious push to achieve carbon neutrality by 2050 and meet the targets of the Paris Climate Agreement.

The mechanism is intended to make sure that imports from outside Europe do not have an unfair advantage if manufactured with a bigger carbon footprint.

The concern is greatest for heavy industry such as steel-making, where European countries face tough competition from cheaper Chinese imports that are made with lower environmental standards.

To level the playing field, non-European products would need to buy pollution permits from the EU's own carbon emissions scheme, known as the EU emissions trading system or ETS.


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Carbon prices have reached records in the EU, a new development after years of ineffectively low prices that failed to incentivise heavy industry to go green.

This was in part due to free allocations of permits handed to Europe's energy intensive sectors like cement and steel-making.

Those freebies will have to be phased-out if the border tax is to comply with rules at the World Trade Organization, a move that Europe's big industry is fighting against.

After a furious round of last minute lobbying this week, industrial associations succeeded in avoiding their free allocations being stripped.

"Under pressure from European conservatives, this was removed from the European Parliament's proposal," said Belgian MEP Kathleen Van Brempt.

However, "when we impose these rules on foreign producers, it is not an option to let our own industry pollute for free," she added.

The parliament's endorsement is intended to influence the commission, the EU's executive arm that will make its formal proposal in June, with the member states likely to fix their own position on the issue after that.

The final law will be a compromise of the various versions that will be struck in a pain-staking negotiation process that could take months or longer.

The target date for the start of the mechanism is 2023.


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