Wednesday 07 July 2021 11:14 am

EU expects to generate €10bn from new carbon levy

Brussels intends to use the funds to pay down debt taken on through its Covid recovery scheme

The EU expects to generate nearly €10bn a year from a new carbon levy on imports as part of its push to tackle climate change.

Brussels intends to use the funds to pay down the billions of euros the EU collectively borrowed through its Covid recovery scheme.

The tariff, called the Carbon Border Adjustment Mechanism, is intended to protect European businesses from international competitors that produce products is countries with less punitive environmental regulations.

The tax will be introduced gradually from 2023, the European Commission said.

Industry leaders want the mechanism to come in to force as soon as possible to ensure they are not undercut by foreign producers able to flood the market with cheaper, less-environmentally friendly goods.

The measure is seen as an effective way of reducing so-called “carbon leakage” where companies shift their operations outside the EU to avoid stiff climate regulations, while still supplying the European markets with goods and services.

Commodities and raw materials, such as iron, steel and cement, will be the first products caught by the tax.

The measures are part of an overhaul in the way Brussels regulates carbon-intensive businesses in an effort to reduce emissions.

The EU is also considering tweaking the Emissions Trading Scheme, where European businesses buy permits at a price set by the market in order to cover the cost of their emissions.