The Strategist

EU obliges its importers to pay for harmful emissions

10/02/2023 - 04:10

On Sunday, the first phase of the EU's Carbon Border Adjustment Mechanism went into force, requiring foreign importers in six carbon-intensive industries that supply the EU with their products to report harmful emissions to the European Commission.

Later on in the mechanism's lifecycle, it will compel exporters from outside the EU to make up any discrepancies in payments for harmful air emissions caused by laxer national environmental regulations than harsher European regulations. 

Thus, as the European Commission asserts, the EU aims to ensure a level playing field for its own producers, who, in contrast to foreign firms, pay for carbon dioxide emission permits, creating unfair competitive conditions with suppliers outside the EU, who are subject to significantly more lax national environmental regulations.

The system also intends to stop European businesses from shifting their manufacturing to nations with lesser environmental regulations.

According to the new regulations, foreign producers who sell their goods in the EU will be required to pay the same amount for carbon dioxide emissions as if their facilities were in the EU. The European Commission notes this would not only level the playing field on the market but will also promote the growth of more environmentally friendly production outside of the EU.