European Union reaches landmark agreement on a pollution tax for imports

The European Union’s Carbon Border Adjustment Mechanism reached an provisional deal between the Council of the EU and the members of the European Parliament.

In a statement, the Parliament said the CBAM levy would be established “to equalise the price of carbon paid for EU products operating under the EU Emissions Trading System (ETS) and the one for imported goods.”

This has huge implications for any organisation, business and industry. Will this lead to a normalised, central price for the EU? Or will this lead to more arbitrage by adding the CBAM into the equation?

The current plans state that firms who are importing into the EU will need to buy CBAM certificates to offset the difference between the carbon price paid in the country of production and the price of carbon allowances in the EU Emissions Trade System. This will have an effect on the profitability of EU companies who have their production outside the EU.

The CBAM will cover a range of goods and sectors such as electricity, fertilizers, aluminum, cement, steel and iron. It has also been broadened to include hydrogen and other products like bolts and screws.

“Only countries with the same climate ambition as the EU will be able to export to the EU without buying CBAM certificates,” according to the statement by the EU Parliament and “the new rules ensure that EU and global climate efforts are not undermined by production being relocated from the EU to countries with less ambitious policies.”

These plans have been designed to fully comply with World Trade Organization rules. The question this raises is an obvious one: Will the EU and World Trade Organisation set the standard for the price of Carbon or will it start to out-price itself in the global market by making itself too expensive to export to?

Karbun will add CBAM certificates to its exchange and swap market to further expand on it’s all encompassing platform. Karbun is not just carbon credit trading but BNG unit trading exchange but it will introduce commodities and bridge the gap to the conventional financial markets. Blockchain is the next level of technology that automates transaction between individuals, businesses and governments.

Karbun’s Green Project Launchpad will give the companies the runway and support to not only raise capital but also structure their business for a strong launch on Karbun’s many partner centralised exchanges.