Let the pollutors pay: In a first, EU strikes deal on carbon border tariff

The European Union struck a political deal on Tuesday to impose a carbon dioxide emissions price on imports of polluting commodities like steel and cement, a groundbreaking programme intended to boost European companies as they decarbonise. The decision came about after all-night talks.

Negotiators from EU nations and the European Parliament reached an agreement on the bill imposing CO2 emissions penalties on imports of iron and steel, cement, fertilisers, aluminium, and energy.

Firms bringing in those products to the EU will need to purchase certifications to cover their embedded CO2 emissions. The plan aims to apply the same CO2 price to local EU industry and foreign businesses, the latter of which are currently required to purchase permits from the EU carbon market.

Mohammed Chahim, European Parliament's lead negotiator on the law, said the border tariff would be crucial to EU efforts to fight climate change.

"It is one of the only mechanisms we have to incentivise our trading partners to decarbonise their manufacturing industry," Chahim said.

Also WATCH | WION Climate Tracker: EU strikes deal on world's first carbon border tariff

The tax's purpose is to shield European businesses from being outbid by less expensive products coming from nations with laxer environmental regulations.

It will also apply to imported hydrogen, which was a demand made during the discussions but was not included in the initial EU plan.

This week's discussions on a reform of the EU carbon market will define some of the law's specifics, including when it will go into effect.

In order to protect local industry from foreign competition, the EU now provides free CO2 licences. However, to comply with WTO regulations, the EU aims to phase out these free permits once the carbon border tax is implemented. The discussions around the carbon market will determine how swiftly that phase-in occurs. 

(With inputs from agencies)

WATCH WION LIVE HERE: