European Union governments have reached an agreement on the world's first major border tax. The innovative initiative is part of a review of the bloc's main carbon market, which aims to make the European economy carbon neutral by 2050.

The Carbon Border Adjustment Mechanism adds a pollution price to certain imports to the European Union. Carbon-intensive industries within the bloc must comply with strict emissions standards, and the EU says the tax is designed to ensure that these businesses are not harmed by competitors in countries with weaker rules.

The measure will first be applied to the iron and steel, cement, aluminium, fertilizer, electricity and hydrogen production sector and discourages EU companies from moving production to more tolerant countries, something EU lawmakers call a "carbon leak."

Under the new mechanism, companies will need to buy certificates to cover emissions generated by the production of goods imported into the European Union on the basis of calculations linked to the EU's own carbon price.

However, the new tax has met resistance from countries such as the United States and South Africa, which are concerned about the impact of the measure on their manufacturers.

It is worth remembering that the European Union and the United States recently disagreed on the Inflation Reduction Act, the billion-dollar climate plan approved this year under President Joe Biden, which encourages national production to combat the climate crisis.

The new tax is part of a broader agreement reforming the EU's carbon market, known as the Emissions Trading System (ETS), to reduce its emissions by 62% by 2030 compared to 2005.

On the European market, which is the EU's main instrument of climate action, companies receive or buy allowances or allowances, which can then be negotiated. Under the new agreement, the carbon market will include shipping and land transport companies, government buildings and garbage incinerators. The entry of these sectors will be scaled. For shipping companies, the key date is 2026; for road transport and public buildings, 2027. The other ones will still be debated.

In addition, the pact also established the creation of the Social Climate Fund, so that the bloc and its member states can afford to protect citizens from strong increases in energy prices. Most of the amount, which has a total of 86.7 billion euros to be made available, will be for infrastructure works for improvements in the energy sector, but about 37.5% can be used for direct incentives to households.

Source: Um só Planeta