EU Expands Carbon Border Tax to Combat Climate Evasion

The European Union plans to extend its carbon border levy to include car parts, refrigerators, and washing machines. This expansion aims to close loopholes allowing foreign manufacturers to avoid climate costs. The levy also intends to encourage global manufacturers towards cleaner production methods.

The European Union is set to broaden its Carbon Border Adjustment Mechanism, extending its reach to include car parts, refrigerators, and washing machines. According to draft documents reviewed by Reuters, this expansion is intended to secure the region's industries from cheaper, high-emission imports.

The proposed regulation will involve industries that utilize construction products for bridges, farming machinery, and power transformers. This strategy specifically targets products considered at risk for 'carbon leakage', a term referring to companies relocating outside Europe due to stringent climate policies.

The initiative also outlines a financial plan wherein 25% of the carbon tax revenue will support European manufacturers adapting to the costs of these policies over 2028-2029. However, the proposal does not guarantee aid for exporters, leading to concerns over potential WTO rules violations.

(With inputs from agencies.)