Europe’s carbon border tax: a bold move to reduce global emissions or a violation of international trade?
On April 25, after more than two years of negotiations, the European Union approved its first carbon tax on imports, which will seek to help European products, burdened by the carbon tax they have to pay, compete on better terms with cheaper imports that do not have to.
When the carbon border tax comes into force in 2026, companies importing products into the European Union will have to buy carbon credits to offset the footprint of those products: effectively an additional levy to prevent them from competing at an advantage, while discouraging European manufacturers from relocating to other countries and then importing goods to avoid European carbon taxes, a practice known as carbon leakage.
The move will impact many developing countries that do not offset their emissions through the carbon credit markets, and that depend on their trade with the European Union. They argue that the EU is effectively deindustrializing them by making their exports less competitive. China, which manufactures around 10% of the affected products, says the tax is illegal and violates the principles of free trade.
The tax will be imposed on products that generate significant emissions in their production such as steel, aluminum, cement…
