Carbon tariff

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A carbon tariff or carbon border adjustment mechanism (CBAM) is an eco-tariff on embedded carbon. [1] In 2024 the United States said it is not a carbon tax, [2] but the World Trade Organization is dysfunctional so is unable to agree or disagree. [3] One aim to prevent carbon leakage from nations without a carbon price. [1] Examples of imports which are high-carbon and so may be subject to a carbon tariff are electricity generated by coal-fired power stations, iron and steel from blast furnaces, and fertilizer from the Haber process. Several countries levy carbon tariffs or are considering them. [4]

Contents

Existing and forthcoming

European Union

This section is an excerpt from EU Carbon Border Adjustment Mechanism.[ edit ]
The EU Carbon Border Adjustment Mechanism (CBAM, pronounced Si-Bam) is a carbon tariff on carbon intensive products, such as steel, [5] cement and some electricity, [6] imported to the European Union. [7] Legislated [8] as part of the European Green Deal, it takes effect in 2026, with reporting starting in 2023. [9] [10] CBAM was passed by the European Parliament with 450 votes for, 115 against, and 55 abstentions [11] [12] and the Council of the EU with 24 countries in favour. [13] It entered into force on 17 May 2023. [14]

United Kingdom

This section is an excerpt from UK CBAM.[ edit ]
The United Kingdom Carbon Border Adjustment Mechanism (UK CBAM) is a carbon tariff on imports of certain goods produced with high carbon emission into the United Kingdom, similar to the European Union’s CBAM. It will cover slightly different goods, with the list pending consultation in 2024, and is to be rolled out in 2027. The sectors within scope are aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel. [15] [16] There are some differences regarding the type of emissions covered. Both EU and UK CBAM cover direct (‘Scope 1’) emissions. Regarding indirect (‘Scope 2’) emissions, the EU covers only emissions from electricity consumed during the production process. The UK CBAM proposals cover more indirect emissions, namely from heat, steam and cooling, as well as electricity. [17]

California

California has a carbon border adjustment mechanism for imported electricity. [18]

Related Research Articles

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A carbon tax is a tax levied on the carbon emissions from producing goods and services. Carbon taxes are intended to make visible the hidden social costs of carbon emissions. They are designed to reduce greenhouse gas emissions by essentially increasing the price of fossil fuels. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive. When a fossil fuel such as coal, petroleum, or natural gas is burned, most or all of its carbon is converted to CO2. Greenhouse gas emissions cause climate change. This negative externality can be reduced by taxing carbon content at any point in the product cycle.

<span class="mw-page-title-main">European Union Emissions Trading System</span> First large greenhouse gas emissions trading scheme in the world

The European Union Emissions Trading System is a carbon emission trading scheme that began in 2005 and is intended to lower greenhouse gas emissions in the EU. Cap and trade schemes limit emissions of specified pollutants over an area and allow companies to trade emissions rights within that area. The ETS covers around 45% of the EU's greenhouse gas emissions.

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<span class="mw-page-title-main">Energy policy of the European Union</span> Legislation in the area of energetics in the European Union

The energy policy of the European Union focuses on energy security, sustainability, and integrating the energy markets of member states. An increasingly important part of it is climate policy. A key energy policy adopted in 2009 is the 20/20/20 objectives, binding for all EU Member States. The target involved increasing the share of renewable energy in its final energy use to 20%, reduce greenhouse gases by 20% and increase energy efficiency by 20%. After this target was met, new targets for 2030 were set at a 55% reduction of greenhouse gas emissions by 2030 as part of the European Green Deal. After the Russian invasion of Ukraine, the EU's energy policy turned more towards energy security in their REPowerEU policy package, which boosts both renewable deployment and fossil fuel infrastructure for alternative suppliers.

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<span class="mw-page-title-main">Carbon emission trading</span> Approach to limit climate change

Carbon emission trading (also called carbon market, emission trading scheme (ETS) or cap and trade) is a type of emissions trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHGs). A form of carbon pricing, its purpose is to limit climate change by creating a market with limited allowances for emissions. Carbon emissions trading is a common method that countries use to attempt to meet their pledges under the Paris Agreement, with schemes operational in China, the European Union, and other countries.

An eco-tariff, also known as an environmental tariff, is a trade barrier for the purpose of reducing pollution and improving the environment. These trade barriers may take the form of import or export taxes on products that have a large carbon footprint or are imported from countries with lax environmental regulations. A carbon tariff is a type of eco-tariff.

<span class="mw-page-title-main">Energy in Switzerland</span>

Energy in Switzerland is transitioning towards sustainability, targeting net zero emissions by 2050 and a 50% reduction in greenhouse gas emissions by 2030.

<span class="mw-page-title-main">Carbon fee and dividend</span> Variant of carbon tax that restricts revenue use to direct payments to the people

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<span class="mw-page-title-main">Energy in Singapore</span>

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<span class="mw-page-title-main">Renewable energy in Turkey</span>

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<span class="mw-page-title-main">Electricity in Turkey</span> Electricity generation, transmission and consumption in Turkey

Turkey uses more electricity per person than the global average, but less than the European average, with demand peaking in summer due to air conditioning. Most electricity is generated from coal, gas and hydropower, with hydroelectricity from the east transmitted to big cities in the west. Electricity prices are state-controlled, but wholesale prices are heavily influenced by the cost of imported gas.

<span class="mw-page-title-main">Greenhouse gas emissions by Turkey</span> Climate-changing gases from Turkey: sources, amounts, and mitigation policies

Coal, cars and lorries vent more than a third of Turkey's five hundred million tonnes of annual greenhouse gas emissions. They are mostly carbon dioxide and part of the cause of climate change in Turkey. A quarter of the emissions are from electricity generation.

<span class="mw-page-title-main">European Green Deal</span> Plan to transform the EU into a climate-neutral economy by 2050

The European Green Deal, approved in 2020, is a set of policy initiatives by the European Commission with the overarching aim of making the European Union (EU) climate neutral in 2050. The plan is to review each existing law on its climate merits, and also introduce new legislation on the circular economy (CE), building renovation, biodiversity, farming and innovation.

<span class="mw-page-title-main">EU Carbon Border Adjustment Mechanism</span> EU carbon tariff on carbon intensive products

The EU Carbon Border Adjustment Mechanism is a carbon tariff on carbon intensive products, such as steel, cement and some electricity, imported to the European Union. Legislated as part of the European Green Deal, it takes effect in 2026, with reporting starting in 2023. CBAM was passed by the European Parliament with 450 votes for, 115 against, and 55 abstentions and the Council of the EU with 24 countries in favour. It entered into force on 17 May 2023.

Fit for 55 is a package by the European Union designed to reduce the European Union's greenhouse gas emissions by 55% by 2030. It is part of the union's strategy of the European Green Deal presented first in December 2019.

The Climate Club is an international initiative aimed at promoting global cooperation in reducing greenhouse gas emissions and accelerating decarbonization, particularly in high-emitting industries and developing economies. Launched in 2022 by the G7, the Climate Club focuses on facilitating collaboration between countries, industries, and other stakeholders to achieve the goals outlined in the Paris Agreement and limit global temperature rise to 1.5°C.

<span class="mw-page-title-main">PROVE IT Act</span> Proposed US carbon monitoring legislation

The Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act, S.1863, is a bill in the United States Senate to study the greenhouse gas intensity of certain industrial products of the United States and other countries. Chris Coons (D‑DE), its lead Senate sponsor, intends it to "provide reliable data that’s needed to quantify the climate benefits of the United States’ investments in cleaner, more efficient manufacturing practices and to hold nations like China accountable for their emissions-heavy production of goods like steel." John Curtis, the bill's lead House sponsor, describes it as "leveling the playing field in international competition" given US regulations and technology for cleaner energy. He also envisions it helping to "strengthen our trade relationships, and provide our allies with a reliable energy partner."

The United Kingdom Carbon Border Adjustment Mechanism is a carbon tariff on imports of certain goods produced with high carbon emission into the United Kingdom, similar to the European Union’s CBAM. It will cover slightly different goods, with the list pending consultation in 2024, and is to be rolled out in 2027. The sectors within scope are aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel. There are some differences regarding the type of emissions covered. Both EU and UK CBAM cover direct emissions. Regarding indirect emissions, the EU covers only emissions from electricity consumed during the production process. The UK CBAM proposals cover more indirect emissions, namely from heat, steam and cooling, as well as electricity.

References

  1. 1 2 "What is a Carbon Border Adjustment Mechanism?". Brookings. Retrieved 2024-11-13.
  2. ↑ "What is a carbon border adjustment mechanism (CBAM) and what are some legislative proposals to make one?". United States Congressional Joint Economic Committee . Retrieved 2024-11-13.
  3. ↑ Porterfield, Matthew C. "Carbon Import Fees and the WTO" (PDF).
  4. ↑ "EU's CBAM to spur other countries to introduce carbon border levies: IETA".
  5. ↑ "Why Ukraine peace talks are more about talking than peace". www.ft.com.
  6. ↑ Gore, Tim (13 September 2021). "The proposal for a Carbon Border Adjustment Mechanism fails the ambition and equity tests". Heinrich-Böll-Stiftung . Retrieved 3 October 2021.
  7. ↑ Oung, Angelica (2 October 2021). "Ministry urges firms to step up decarbonization". Taipei Times . Retrieved 3 October 2021.
  8. ↑ Smith-Meyer, Bjarke (14 September 2021). "OECD boss: Digital tax deal can inspire global deal on carbon pricing". Politico . Retrieved 3 October 2021.
  9. ↑ Catrain, Lourdes; Seeuws, Stephanie; Schroeder, Stefan; Poll-Wolbeck, Finn; Maruyama, Warren H.; Hawkins, Gregory M. (9 September 2021). "The EU Carbon Border Adjustment Mechanism : inspiration for others or Pandora's box?". engage.hoganlovells.com. Archived from the original on 28 September 2021. Retrieved 22 November 2021.
  10. ↑ Hancock, Alice; Espinoza, Javier (18 December 2022). "Brussels agrees details of world-first carbon border tax". Financial Times . Retrieved 20 December 2022.
  11. ↑ "Carbon border adjustment mechanism as part of the European green deal". Legislative Train Schedule (European Parliament). 20 November 2022. Retrieved 20 December 2022.
  12. ↑ "Results of Votes (22 June 2022)" (PDF). European Parliament . 22 June 2022. Archived from the original (PDF) on 9 July 2022. Retrieved 20 December 2022.
  13. ↑ Council (2023). "Voting record".
  14. ↑ "Carbon Border Adjustment Mechanism". European Commission. European Union. Retrieved 21 May 2023.
  15. ↑ PricewaterhouseCoopers. "UK Government to implement CBAM by 2027". PwC. Retrieved 2024-06-19.
  16. ↑ "Factsheet: UK Carbon Border Adjustment Mechanism". GOV.UK. Retrieved 2024-06-19.
  17. ↑ "Research Briefing. Carbon Border Adjustment Mechanism". 2024-03-05.
  18. ↑ "California ETS Border Carbon Adjustment". Model Laws for Deep Decarbonization in the United States. Retrieved 21 May 2023.
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