EU Planning to Expand Scope of Carbon Tariff
The EU is aiming to expand the scope of its upcoming carbon border tariff to apply to 180 steel and "aluminium-intensive" products produced downstream.
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The current version of the carbon border adjustment mechanism (CBAM), which takes effect Jan. 1, will impose duties on certain imports of cement, iron, steel, aluminum, fertilizers, electricity and other basic items (see 2510210021). The European Commission said its new proposal, released this week, will "close loopholes to prevent circumvention" of the carbon tariff by adding downstream products to its scope.
Although a duty for emissions tied to imports of metals and other similar basic goods will help safeguard "against carbon leakage, it raises costs for EU producers using these materials in downstream products, such as washing machines," the EC said. "Production may shift to countries with weaker climate policies, or EU goods might be substituted with carbon-heavy imports."
To counter this, the EU said it plans to "expand CBAM's reach to include 180 steel and aluminium-intensive products, like machinery and appliances, ensuring emissions are reduced rather than relocated."
The scope will cover certain machinery, hardware and fabrications, vehicle parts, domestic appliances, construction equipment and more, the EC said in its FAQs, noting that it includes products with a "high share of steel and/or aluminium content (on average, 79% steel/aluminium content)." The commission also listed examples of downstream products that would be covered, such as "stranded wire, ropes and cables made of more than 95% stainless steel. However, the proposed list also includes more complicated goods based on multiple CBAM inputs such as washing machines, which consist of around 60% steel, 5% aluminium and 5% cement."
In addition, the EC said it's proposing other measures to improve "reporting requirements for better traceability of CBAM goods" and address "emission intensity misdeclarations." This will give the commission authority to "tackle evidence-based abuses circumventing CBAM's financial responsibilities, requiring additional evidence when actual values are unreliable, and defaulting to country values in such specific cases."
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