EU introduces the world’s first border tax on CO2

The European Union is set to kickstart the first phase of its pioneering plan to introduce the world’s first border carbon tax next month, mandating importers to report CO2 emissions from the production of goods being brought into Europe.

The aim of the new regime is to prevent undermining the EU’s domestic industry by foreign competitors that pollute more while Europeans invest in emission reduction.

The plan will be fully enforced from 2026, imposing a charge on CO2 emissions at the time of import into the EU, matching what European companies already pay on the European carbon market.

The largest volumes of exports affected by the CO2 emission tax are expected to impact Turkey, Ukraine, China, and Russia, though trade between the EU and Russia significantly declined after the onset of the conflict in Ukraine.

Representatives from European industries, Ukraine, and the UK stated they anticipate minimal initial impact but are gearing up for potentially significant consequences when the full CO2 emission tax is implemented in 2026.

Starting from October, companies importing steel, cement, aluminum, electricity, fertilizers, hydrogen, and similar items into the EU will be required to report emissions associated with the production of these goods.

Companies failing to report face fines of up to 50 euros per tonne of CO2 if they fail to comply.

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