Carbon pricing on imported goods
A carbon border adjustment mechanism would encourage companies in and outside the EU to decarbonise, by placing a carbon price on the imports of certain goods if they come from countries with less ambitious climate legislation. It is intended to avoid carbon leakage, which is when industries move production to countries with less strict greenhouse gas emissions rules.
As part of the Fit for 55 package, the EU will create a Carbon Border Adjustment Mechanism applying a carbon levy on imports of certain goods from outside the EU. It will cover goods from energy-intensive industries such as iron, steel, cement, aluminium, fertilisers and hydrogen.
Importers will have to pay any difference between the carbon price paid in the country of production and the price of carbon allowances under the EU’s Emissions Trading System.
The Carbon Border Adjustment will be phased in from 2026 until 2034 at the same time as the free allowances in the EU Emissions Trading System are being phased out. Parliament adopted the rules in April 2023.