EU Considers Broader Scope for Carbon Border Tax
The European Union (EU) is planning to extend its carbon border tax to a wider range of industrial products, including automotive spare parts, refrigerators, and washing machines, according to draft European Commission documents reviewed by Reuters.
The initiative forms part of a broader policy package linked to the Carbon Border Adjustment Mechanism (CBAM), a regulatory tool designed to ensure that imported goods face the same carbon costs as products manufactured within the EU.
A Pillar of the EU’s Climate and Trade Strategy
CBAM is intended to price CO₂ emissions embedded in imports, notably in sectors such as steel, cement, and other carbon-intensive goods. The mechanism is scheduled to enter into force in January, marking a key step in the EU’s climate policy framework.
The European Commission is expected to formally present the proposal on Wednesday, according to the draft documents.
Addressing the Risk of Carbon Leakage
“The proposal will extend the scope of the Carbon Border Adjustment Mechanism to address the risk of carbon leakage for downstream products in the value chain of steel and aluminium products currently covered by CBAM,” the draft Commission proposal states.
Carbon leakage refers to the risk that companies relocate production outside the EU to avoid stringent climate regulations, while continuing to serve the European market.
Closing Regulatory Gaps in Global Trade
The Commission aims to close a loophole that allows foreign steel and aluminium producers to reduce direct exports of raw metals to the EU — thereby avoiding CO₂ charges — while exporting finished or semi-finished products with high steel or aluminium content, which are not currently subject to the carbon border tax.
By extending CBAM downstream, the EU seeks to restore competitive balance between European manufacturers and their international counterparts.
Possible Extension to Additional Sectors
According to the documents, the Commission will also consider extending the carbon border tax to cover more downstream products in the cement, fertiliser, and hydrogen sectors.
A Commission spokesperson declined to comment on the draft proposal, noting that the text could still be amended before its official publication.
