cross-posted from: https://scribe.disroot.org/post/6425504
- As of 1 January 2026, the so-called ‘green tariff’ rules come into force, effecting high-carbon products like high-carbon products like steel, aluminium, and cement
- Also called carbon border adjustment mechanism (CBAM), it creates a level playing field between the EU and overseas competitors like U.S. and particularly China, where environmental standards are much lower than in Europe
- EU businesses already pay for carbon pollution under the bloc’s emission trading system
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The biggest shake-up of green trade rules for decades comes into force today, as companies selling steel, cement and other high-carbon goods into the EU will have to prove they comply with low-carbon regulations or face fines.
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Companies should welcome the carbon border adjustment mechanism (CBAM), which aims to create a level playing field between the EU and overseas competitors, said Stéphane Séjourné, the European Commission’s executive vice-president for prosperity and industrial strategy. “European industrial producers should be encouraged – and not deterred – in their decarbonisation efforts,” he said. “This CBAM reform brings crucial and long-awaited measures to ensure a level playing field between EU and non-EU industrial producers. By strengthening CBAM, we support our industry’s decarbonisation and secure European players’ competitiveness on the world stage.”
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Chinese steel could lose its price advantage over European steel, for instance. However, that could create a glut of steel and other high-carbon products, which some fear could be dumped at low prices into the UK and other markets instead. The UK is expected to bring in its own CBAM next year.
Under the EU rules, exporters to the bloc can buy certificates to cover the carbon emissions generated in the production of their goods. The CBAM is intended to make sure that competitors from countries with poor environmental standards cannot undercut EU businesses and to prevent “carbon leakage”, when producers move to regions with lax regulations because those countries have a cost advantage.
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Initially, the rules will cover iron and steel, aluminium, cement, hydrogen, electricity and fertilisers.
CBAMs in Europe and the UK would help to protect domestic producers, said Diana Casey, the executive director of the Mineral Products Association in the UK, which includes cement producers. “The challenge for us is that the rest of the world is not keeping up in terms of decarbonisation. That’s making production of products like cement much cheaper outside Europe as a consequence,” she said.
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high-carbon products like steel, aluminium, and cement
considers
I think that one problem with this is that stuff like steel and cement goes into capital goods, which means that it can make EU-produced stuff produced using those capital goods uncompetitive in other markets, which may not be desirable to Brussels.
So, okay. Say EU producers of goods complain that competitors are producing goods more-cheaply than they can, because they are emitting a lot of carbon dioxide in doing so. The EU says “okay, we will impose a carbon tax to price in the cost of externalities”.
Say that there’s a producer of, oh, sports cars. Okay, fine, so now EU and non-EU producers are on level footing in selling into the EU market. Also, if they are selling sports cars into an external market, then I assume that the EU isn’t assessing such a tax.
But…not all goods are sports cars.
https://www.worldstopexports.com/cement-exports-by-country/
It looks like Egypt is a major cement exporter.
Say a company is thinking about building a sports car factory. It might do it in Germany. Or it might do it in Egypt.
In Egypt, that sports car factory can be built using inexpensive steel rebar and cement.
In Germany, it can’t.
The cement and steel isn’t directly an input to the sports car (well, some steel probably is used in the car, but setting that aside)…but it could affect the cost of producing that sports car, because it affects capital goods used in the production of that sports car.
Are you aware that all imports into the EU will now trigger this ‘green tariff’ if and when the country of origin - in your example, Egypt - has weaker environmental rules? It would be certainly cheaper without this levy, but, as the latest COP30 showed, with this the EU leads an isolated group of around 80 countries pushing for global climate action.
Unlike in you example, it most often won’t be Egypt where the cheap goods come from but rather China. This is why the country blocked the road to out of fossil fuels together with like-minded governments during the COP.
As The Times wrote at the time: The ‘axis of obstruction’ — Saudi Arabia, Russia and China — blocked the Belém road map as climate experts fear the growth of an anti-action consensus
A deal for a “road map” away from fossil fuels has been scuppered at Cop30 in Brazil after Saudi Arabia, Russia and China successfully blocked the proposal. [Archived link]
The EU makes up 19% of the global economy in nominal terms. It is a huge market and that means other countries want to export to the EU. The smart thing about CBAM is that it tariffs the difference between the exporting countries carbon price and the EUs carbon price. So if Egypt wants to export cement to the EU, it can either hand the EU all the money or it can take it itself, by introducing a carbon price itself.
And?
If we continue the race where the cheapest product wins at the expense of the environment, then we are going to have a climate policy like the one in the U.S., Russia, or China. The world’s biggest polluters have the weakest rule in the combat of climate change. The COP30 in Brazil was another prove for this.
The EU is not good, yet much better.
It’s good that Europe stands firm. I wish it did so in other things (like the ban of combustion engine) also.
[Edit typo.]
What is your argument? Let’s not incentivize a reduction of emissions because someone somewhere might not follow the incentive…?
