International Industry: EU Carbon Tariff Scope to Expand Again! Downstream Products Such as Auto Parts to Be Included

【Taipei Times Compilation: Zhang Chao-chin, Comprehensive Foreign News Report】

The EU will expand the scope of its "Carbon Border Adjustment Mechanism" (a levy on high-carbon imported products) to include downstream products such as car parts and washing machines, according to a draft law to be proposed by the European Commission on Wednesday.

The proposal also aims to plug loopholes that the Commission fears could allow foreign companies to circumvent the levies. The EU will begin collecting these carbon tariffs in January next year.

The EU's Carbon Border Adjustment Mechanism (CBAM) will impose carbon emission levies on imports of steel, aluminum, cement, fertilizers, and other products. The EU hopes this will protect European industries from being impacted by cheap imports from countries with inadequate climate regulations. This has angered trade partners such as China, India, and South Africa, who believe the policy leads to unfair trade treatment.

The EU's legal proposal document shows that the EU will strengthen the carbon border tax, including expanding it to downstream products that use steel and aluminum, such as construction products, power grid components, and machinery.

The EU also plans to strictly regulate foreign companies if there is evidence that they underreport carbon emissions to evade carbon taxes.

According to informed sources, in such cases, the EU may set a "default" emission value for products from that country, which would lead to higher carbon tax bills.

Although CBAM will be collected starting in January 2026, companies can still purchase CBAM credits and submit them to the EU to comply with regulations by September 2027.

Since the EU announced its carbon border tax policy in 2021, many countries, despite criticizing the EU, have also begun to develop their own "carbon pricing" systems, which set a cost price for carbon emissions. EU officials believe this is also a success of CBAM.

The EU also plans to use 25% of the carbon border tax revenue to subsidize European manufacturers for the increased costs due to carbon taxes, especially for companies investing in low-carbon manufacturing.