In 2021 the Carbon Border Adjustment Mechanism (CBAM) proposes a levy on imports of specific products. The aim of introducing CBAM is to prevent ‘carbon leakage’. CBAM will apply to steel products imported into EU (including other industries such as production of aluminium, ammonia, fertilizers and cement).
Between January 2023 and January 2026, non-EU steel producers will need to declare and purchase CBAM certificates to cover GHG emissions related to the production of imported steel products. This will be initially applied to the calculated values of direct emissions (GHG Protocol, Scope 1). Over the years to come it may be extended to indirect emissions (GHG Protocol, Scope 2, 3). Penalty regime under CBAM will be applied only to the importer.
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By using this tax so-called ‘carbon leakage’ will be prevented. ‘Carbon leakage’ may occurred when carbon intensive producers relocate their operations outside of the EU to avoid carbon regulation.
For more details check out the European Commission site https://taxation-customs.ec.europa.eu/green-taxation-0/carbon-border-adjustment-mechanism_en