The EU strategy for a green transition

The carbon border tax

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In April 2023, the European Parliament adopted key laws as a part of its ongoing efforts to tackle climate change. The Regulations include a variety of measures, including the implementation of a carbon tax at the border and the enlargement of the EU Emissions Trading System (ETS).

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The carbon border tax is a crucial component of the new regulations. Its purpose is to discourage companies from moving to countries with less strict environmental regulations. The carbon border tax will mandate that companies importing specific goods into the EU must pay a fee that corresponds to the carbon emissions linked to the production of those goods. A tax will be imposed on various products, such as steel, cement, aluminium, fertilizers, and electricity. The implementation of the carbon border tax is anticipated to take place in 2023, with a gradual phase-in process spanning three years.

The expansion of the EU Emissions Trading System (ETS) is another crucial aspect of the new regulations. The ETS is a cap-and-trade system that sets a maximum limit on the quantity of carbon dioxide that specific industries can release into the atmosphere. In order to emit carbon dioxide, companies must purchase permits, which are gradually reduced in number over time. Since 2005, this system has been credited with reducing carbon emissions in the EU. The upcoming regulations will broaden the scope of the ETS to include more sectors, such as shipping and aviation.

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And new regulations

Apart from the implementation of the carbon border tax and the expansion of the ETS, the new regulations cover several other measures aimed at curbing carbon emissions. The measures contain a mandate for member states to provide National Energy and Climate Plans (NECPs) every decade, a goal to decrease emissions by 55% by 2030 (in comparison to 1990 levels), and a commitment to allocate €100 billion towards climate action in the upcoming seven years.

Environmental groups have widely praised the new regulations, viewing them as a crucial step towards combating climate change. Nonetheless, certain business groups have raised apprehensions regarding the repercussions of the regulations on their business activities. Some argue that implementing a carbon border tax may result in increased prices for products imported into the EU, potentially causing harm to consumers. There is concern that the expansion of the ETS may result in increased costs for industries that are already facing financial difficulties.

Although there are concerns, the EU has emphasized the significance of taking action to tackle climate change. European Commission President Ursula Von der Leyen has expressed a strong commitment to addressing climate change and ensuring a brighter future for generations to come. This set of measures serves as our guide towards achieving a climate-neutral Europe by the year 2050.

The EU's new carbon regulations are a significant step forward in the global efforts to combat climate change. Although there may be obstacles to overcome, the EU's dedication to decreasing carbon emissions is an encouraging indication that other nations could also adopt similar measures. We can take action now to reduce the severe effects of climate change and create a sustainable future for ourselves and future generations.
For further information about these new measures, please read this article on the European Parliament website.

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