European Union leaders struck a deal early Tuesday to impose a carbon dioxide emissions tariff on imports of polluting goods, such as iron, cement, steel, and aluminum, in an effort to shield industries that are supposed to reduce emissions.
After hours of intense negotiations, leaders from the EU’s 27 member countries and the European Parliament reached a consensus on the Carbon Border Adjustment Mechanism (CABM), a first-of-its-kind agreement that will take effect beginning October 2023.
Starting then, companies that import high-polluting goods into the EU will be required to purchase certificates to cover their CO2 emissions.
The goal of the tariff is to prevent industries in the bloc from being undercut by cheaper goods produced overseas in countries with looser environmental rules.
“This mechanism promotes the import of goods by non-EU businesses into the EU which fulfill the high climate standards applicable in the 27 EU member states,” Jozef Sikela, the Czech Republic’s minister of Industry and Trade, said in a statement.
“This will ensure a balanced treatment of such imports and is designed to encourage our partners in the world to join the EU’s climate efforts.”
Some key details of CABM, including how quickly the phase-in takes effect, will be ironed out later this week when leaders meet for related negotiations on a reform of the EU carbon market. Those talks are expected to take place Friday or Saturday.
The plan is expected to cause friction with China and India, which have already criticized the effort.
It also comes amid growing tensions within the EU over the U.S. Inflation Reduction Act, the $369 billion climate law that provides subsidies for “Made in America” green technologies and electric vehicle components.
“Of course CBAM will have impact on our trade partners because it’s designed to,” Pascal Canfin, the head of the EU Parliament’s environment committee, told reporters at a briefing Tuesday in Brussels. “It’s important that the EU leads on the connection between climate and trade policies.”