EU Taxation Director General Says US Exports Unlikely to Be Affected by Carbon Border Adjustment Tax
Gerassimos Thomas, director-general for taxation and customs union at the European Commission, said American observers of the carbon border adjustment mechanism are wrong to focus on the lack of a U.S. cap and trade or carbon tax when thinking about how the CBAM will affect U.S. exporters. The main threshold exports to the Euopean Union have to reach is if the goods are made with the same amount or less carbon intensity than EU-produced goods, he said during an online program at the Center for Strategic and International Studies, The CBAM will only apply to steel, aluminum, cement, fertilizer and electricity, not to finished products made with these goods.
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It's only if the steel or cement is not as clean as the EU product that the EU would then consider whether the foreign supplier had to buy cap and trade credits or pay a carbon tax. "The carbon price is a secondary consideration," he said. If the producer's country either didn't have a price on carbon, or that price was lower than in the EU, the EU importer would have to buy emission credits in Europe's cap and trade system.
But even more importantly, Thomas said, "in these products, we do not have imports from the U.S." Still, Thomas is meeting with members of Congress to talk about CBAM on Nov. 17, and is heading on to Canada next. Canada does have a price on carbon.
Thomas said the CBAM, at least until 2030, will mostly affect countries near the EU, like Turkey, Russia and Ukraine. He said that Turkey and Russia are thinking about carbon taxation and Ukraine is planning a cap and trade system to start in 2025. "We have chosen a pathway that is not very aggressive," he said, with "quite a bit of time to discuss with our international partners to see how it will work." Thomas said there is one developing country with a lot of aluminum exports to the EU, and the EU intends to give them grants to improve their production processes. "We will help this country transition," he said. "There are solutions in all of these. The key is to engage."