BRUSSELS: The European Union starts the initial phase of its plan for the world’s first carbon border tax next month, requiring importers to report the CO2 emissions of products sold into Europe, such as steel and cement, or risk financial penalties.

The aim of the new regime is to prevent domestic EU industries from being undercut by more-polluting foreign competitors, while they invest in reducing emissions.

Once it is fully in force from 2026, imports into the EU will pay a CO2 fee equal to what European companies already pay in Europe’s carbon market.

Turkiye, Ukraine, China and Russia are expected to have the biggest volumes of exports affected by the CO2 tax — although EU trade with Russia has plunged since the Ukraine conflict.

Industries in Europe, Ukraine and Britain said they expected little initial impact, but warned of potentially significant fallout when the full CO2 levy launches in 2026.

From October, the CO2 levy’s trial phase will require companies importing steel, cement, aluminium, electricity, fertilisers and hydrogen into the EU to report the emissions involved in producing those goods. Companies will face penalties of up to 50 euros per tonne of CO2 if they don’t report. From 2026, there will be a CO2 fee applied to goods brought into the EU.

A UK Steel spokesperson said it is not expecting a significant impact in the initial reporting phase.

A spokesperson for ArcelorMittal Kryvyi Rih, steelmaker ArcelorMittal’s Ukraine subsidiary, said it had “almost all” the data ready to comply.

Published in Dawn, September 14th, 2023