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Car doors, garden tools, washing machines and kitchen stoves will all become subject to the EU’s world-first carbon border tax as part of a hard-fought review that will also include subsidies for European exporters.
The review, which had been due to be presented on December 10, is likely to be delayed by a week, according to two EU officials, due to internal negotiations over the proposals, which also include anti-circumvention measures and subsidies for exporters.
But the officials insisted that the review would come this year, before importers have to start paying the carbon levy from January 1.
The carbon border adjustment mechanism (CBAM) is a first-of-a-kind effort to tax carbon-intensive imports to prevent a flood of cheap products from undercutting the bloc’s heavy industries, which are subject to strict climate regulation and have to pay for greenhouse gas pollution under the bloc’s emissions trading system.
It covers imports from seven sectors including aluminium, steel and fertilisers. It has been criticised by trading partners such as China and India who argue that it is a unilateral trade measure rather than an environmental effort.
Despite the pressure, Brussels has maintained that it will not make exemptions to the levy and argued that it has been successful in pushing other countries to set up their own carbon pricing schemes.
Both China and India are in the process of establishing or expanding their own emissions trading systems. Several countries in Latin America, including Brazil, have also acknowledged that CBAM is a factor in recent decisions to embrace carbon pricing.
Under the EU’s emissions trading system, European industry is charged about €80 per tonne of carbon dioxide emitted. Greenhouse gas emissions in the EU have roughly halved since the introduction of its carbon pricing scheme in 2005.
The aim of extending the tax to downstream products, as well as raw commodities, is to prevent importers setting up facilities in Turkey or other neighbouring countries to process CBAM materials into finished goods before importing them in order to get around the charge.
Several industries, however, have been cautious about the expansion of the levy. ACEA, the car industry body, warned that it could increase supply-chain costs and increase its administrative burden.
Solar Power Europe said any extension should be done gradually to allow companies “to adapt without causing product shortages or sudden price spikes”.
Applia, the EU body for appliance manufacturers, said, however, that the expansion to downstream products would ensure “fair competition worldwide”.
The products that will be included will be decided on the basis of the amount of CBAM material they use and how much risk there is that they could be produced outside the bloc, EU officials said.
The commission is currently deciding in a separate process how to calculate the amount of tax that importers will have to pay for products that do not pay an equivalent carbon levy.
Heavy industries have argued that initial figures set out in a draft document last month were too generous to countries with a much higher carbon footprint.
The review will also set up a subsidy scheme for exporters to ensure that they are not undercut by higher emission and lower cost global competitors when selling in third countries. But negotiations are ongoing as to the source of the financing as proceeds from CBAM itself are already fully committed to other parts of the EU budget, officials said.
The commission confirmed that it intended to present proposals for the extension of the scope of CBAM and the export rebate “by the end of the year”.