EU lawmakers set to urge market-linked levy on imported carbon

The European Parliament’s environment committee is calling for a swift introduction of a penalty on emissions brought into the region as it intensifies the fight against pollution.

Members of the committee voted on Thursday on amendments to a draft resolution urging the European Commission to put a price by 2023 on emissions from imported products, including cement and steel, and link the levy to the region’s emissions market. The commission is drafting a law to penalize carbon-intensive imports in a bid to prevent local producers from moving out of Europe when the bloc introduces stricter policies under its Green Deal.

The 27-nation EU wants to lead the global fight against climate change and plans to toughen its 2030 emissions-reduction goal to at least 55% from 1990 levels. The existing target is a cut of 40%. The new import levy would help avoid carbon leakage, a phenomenon where producers move to regions with laxer pollution rules.

While the planned European Parliament’s call will not be binding on the EU regulatory arm, it sends a political signal on the willingness to move ahead with the plan to tax emissions at border and sheds some light on the potential design of the future measure. Europe’s plans have already sparked unease among its trading partners, including China, Russia and India.

Lawmakers in the committee are in favor of the so-called Carbon Border Adjustment Mechanism to initially cover the power sector and emissions-intensive industries, such as cement, steel, aluminium, oil refinery, paper, glass, chemicals and fertilizers. It should then expand to include imports into Europe of all “products and commodities” covered by the EU Emissions Trading System.

The mechanism should require importers to “buy allowances from a separate pool of allowances to the EU ETS,” with prices corresponding to that in the EU carbon market. Such a design, referred to as a “notional ETS,” is one of the options considered by the commission, which is due to unveil its proposal in June.

Revenues from the new levy should be used to support the EU transition to green economy and step up the bloc’s contribution to international climate finance, helping the poorest and most vulnerable nations. Poorer countries should also be given special treatments to take into account the potential negative impacts that the EU mechanism could have on them.

The environment committee will cast its final vote on the resolution as amended on Friday. Once adopted, it will be subject to a ballot by the full assembly, tentatively scheduled for March.