The European Commission is slated to propose its carbon border tariff policy on July 14. It aims to put EU firms on an equal footing with competitors in countries with weaker carbon policies.
According to a draft proposal, the border tariff should be fully applied in 2026, with a transitional period that will begin in 2023. The Commission stated that the policy measures are in full compliance with the rules of the World Trade Organization (WTO). EU firms are required to buy permits from the carbon market at 51 Euros ($62.06) per tonne of CO2.
Carbon emissions costs will be applied on select imports, including iron and steel. As a requirement, importers will buy digital certificates that each represent a tonne of CO2 emissions within their imported goods. EU carbon market permit cost and its weekly average auction price will determine the certificate prices.
European importers will be required to report total emissions in goods during the previous year and the equivalent border levy certificates by May 31 each year. Failure to report will result in the total of certificates being determined by default values and a penalty equal to three times the certificate.
If an importer is based in a country where they pay a C02 price, then they may be able to claim a reduction, according to the proposed draft.
Notwithstanding the promise to comply with WTO rules, the plan has received disapproval from countries including Russia, which noted that the plan has the potential to make paying for their emissions a condition when selling certain goods into the EU market.