The European Union has reached an agreement in principle on a global tax reform that will impact global markets for iron, steel, aluminium, cement, fertilizer, electricity and hydrogen. We are talking about the introduction of a "green" tax, designed to equalize European manufacturers that comply with the harsh environmental standards of EU production, and foreign suppliers that compete with local producers. This was reported by Reuters with reference to the participants in the discussion on the new tax.
The new tax mechanism will oblige foreign suppliers to pay quotas for carbon dioxide (CO2) emissions, the volumes and cost of quotas will be similar to those already in place for European companies. The cost of the quota will depend on the level of pollution and the "greenness" of the goods that are produced or imported into the EU. At the same time, the allowances themselves can be purchased on the market from those companies that have been able to save on emissions, thus forming a secondary market for emissions. It is clear that the European Union wants to accelerate the solution of environmental problems in the world, as well as to get closer to the goal of reducing emissions by 55% by 2030 compared to 1990 levels.
“This is one of the few mechanisms that we have to encourage our trading partners to decarbonize their manufacturing industries,” Mohammed Shahim, one of the participants in the discussion that ended just at five in the morning, was quoted by the agency as saying.
An agreement in principle was reached during negotiations between representatives of the EU countries and members of the European Parliament, now the European authorities need to prepare a plan for the transition from the current system, when such requirements are implemented in only a few countries in a test mode, to a full-fledged pan-European system. The key objective of the new tax system is to reduce the carbon footprint of production, as well as to equalize European companies that comply with high environmental standards with suppliers from countries that ignore such environmental standards and thus benefit.
At the moment, most European countries issue free emission allowances to their companies, the system has been working in a test mode for some time, so that it was possible to estimate the volume of demand for allowances. Now the EU intends to develop a plan according to which quotas will be paid and will apply not only to European, but also to international companies that supply their products to the EU countries. The speed of implementation of the document has not yet been determined, in addition, the EU will need to conduct an additional examination for the compliance of tariffs with the norms of the World Trade Organization (WTO).
At the same time, the document provides for an exemption from the need to buy carbon credits in the event that similar stringent environmental standards are met in the country where this product was produced. Thus, additional taxation may be avoided by some US companies if the EU recognizes US standards. True, disagreements still remain between the EU and the US over the US green transition stimulus program, under which local companies that actively integrate modern technologies and reduce carbon emissions can qualify for tax incentives.
The EU believes that such incentives also put European and American companies in an unequal position, so discussions on this issue will continue. A negative reaction to the carbon market has already been voiced by a number of Asian countries that cannot yet boast of high environmental standards – we are talking primarily about China.