European Carbon Tariffs Will Take Effect In October 2023! The Fastener Industry Will Be Covered.
Jan 06, 2023
The official website of the European Council reported on January 3 that the Council and the European Parliament reached a provisional and conditional agreement on CBAM, which is expected to start trial operation in October 2023.
Affected multiple industries EMAIL: SALES@AYAFASTENERS.COM
It is reported that carbon tariffs are one of the core parts of the EU's "Fit for 55" emission reduction plan, which aims to levy taxes on imported goods from countries and regions with relatively loose carbon emission restrictions.
Last July, the European Union released a package of emissions reductions called "Fit for 55". These include expanding the EU carbon market, stopping the sale of fuel vehicles, imposing aviation fuel tax, expanding the proportion of renewable energy, and establishing a carbon border tax, etc. 12 new bills, the goal is to reduce carbon emissions by 55% from 1990 levels by 2030.
According to media reports, this carbon tariff agreement is actually the result of overnight discussions between EU officials and parliamentarians. It has been discussed since Monday at 5 o'clock in the morning of Brussels time on Tuesday, and finally finalized the world's first tariff policy related to carbon reduction. The follow-up still needs to be formally approved by the 27 countries and the European Parliament.
According to the agreement reached by the two parties, the carbon border regulation mechanism will cover steel, cement, aluminum, fertilizer, and electricity. In addition to the five products proposed by the EU, the latest agreement also includes hydrogen energy, indirect emissions under certain conditions, specific precursors, and certain downstream products, such as steel products such as screws and bolts.
To prevent local companies from relocating EMAIL: SALES@AYAFASTENERS.COM
The reason why the European Union proposed CBAM is to solve the problem of "carbon leakage". In layman's terms, it is to prevent EU local companies from relocating to escape strict emission reduction policies.
The U.S.’s Inflation Cut Act puts the world at risk of an intensification of trade disputes as the European Union pushes forward with carbon tariffs. The European Union, Japan, and South Korea agreed that the provisions on electric vehicle subsidies in the "Inflation Reduction Act" are discriminatory policies and violate WTO rules.
Although the EU's carbon tariffs have been criticized for easily triggering trade disputes, the EU argues that, as an environmental measure, CBAM complies with international trade rules, and its goal is to prevent European industries from transferring carbon emissions outside the EU.
Relevant product imports will purchase carbon credits EMAIL: SALES@AYAFASTENERS.COM
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The current agreement tentatively schedules the EU carbon tariff to come into effect in October 2023 and start trial operation. The initial carbon tariff only applies to reporting obligations and is aimed at collecting data. The policy will be gradually implemented in the future, and eventually, all companies will be required to purchase carbon credits when importing related products.
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In the context of the energy crisis, the price of carbon credits in Europe is also rising. Since the beginning of this year, the transaction price has basically fluctuated around 80 euros/ton. Baosteel Co., Ltd., the world leader in the steel industry, also mentioned the impact of EU carbon tariffs in the "2021 Climate Action Report" released in the middle of this year. According to the tax of 80 euros per ton of carbon dioxide, the company estimates that it will be levied 40-80 million euros per ton annual carbon border tax.
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The EU will also discuss the EU carbon trading mechanism this week, aiming to ensure a consistent policy environment for domestic and foreign companies and avoid violating WTO rules. At present, the European Union gives free carbon credits to local industries, but with the implementation of carbon tariffs, the free credits will be gradually canceled. The specific process and speed of progress will be further detailed by the EU in this week's negotiations.
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It is worth mentioning that the carbon tariff also includes an exemption mechanism, and countries that are consistent with the EU's emission reduction standards will enjoy tax exemption. However, Mohammed Chahim, a member of the European Parliament who led the negotiations, also emphasized on Tuesday that countries without exact carbon trading prices cannot enjoy exemptions, which means that even the G7 countries that are members of the "climate club" cannot directly enjoy exemptions.
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