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EU to withdraw free CO2 pollution credits to clear way for carbon border tax

(EurActiv, 14 Sep 2020) The European Commission plans to withdraw free allowances given to polluting industries under the EU’s emission trading system (ETS) in order to clear the way for their inclusion in the bloc’s upcoming carbon border adjustment mechanism, the EU executive’s vice-president, Valdis Dombrovskis, said on Monday (14 September).

A CO2 levy on importers of goods from countries with lower environmental standards is one of the new ‘own resources’ being considered to finance the EU’s €750 billion recovery fund.

The new carbon tax, however, faces many hurdles including the difficulty of making the new mechanism compatible with World Trade Organisation rules. 

To that end, Dombrovskis said it will be “important” to revisit the system of free CO2 allowances handed to energy-intensive industries under the EU carbon market, the Emissions Trading Scheme (ETS).

“We cannot create a situation where we give our companies free allowances, basically letting them pollute, and then imports of the very same goods are subject to levies, additional payments, based on the fact that they are polluting,” Dombrovskis said during a webinar organised by BusinessEurope, the EU employer’s group.

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EurActiv, 14 Sep 2020: EU to withdraw free CO2 pollution credits to clear way for carbon border tax