Carbon tariff

A carbon tariff or carbon border adjustment mechanism (CBAM) is an eco-tariff on embedded carbon.^[1] In 2024 the United States said it is not a carbon tax,^[2] but the World Trade Organization has not come to a conclusion.^[3] One aim to prevent carbon leakage from nations without a carbon price.^[1] Examples of imports which are high-carbon and so may be subject to a carbon tariff are electricity generated by coal-fired power stations, iron and steel from blast furnaces, and fertilizer from the Haber process. Several countries levy carbon tariffs or are considering them.^[4]

Existing and forthcoming

European Union

This section is an excerpt from EU Carbon Border Adjustment Mechanism.[edit]

The EU Carbon Border Adjustment Mechanism (CBAM, pronounced Si-Bam) is a carbon tariff on carbon intensive products, such as steel,^[5] cement and some electricity,^[6] imported to the European Union.^[7] Legislated^[8] as part of the European Green Deal, it takes effect in 2026, with reporting starting in 2023.^[9][10] CBAM was passed by the European Parliament with 450 votes for, 115 against, and 55 abstentions^[11][12] and the Council of the EU with 24 countries in favour.^[13] It entered into force on 17 May 2023.^[14]

United Kingdom

This section is an excerpt from UK CBAM.[edit]

The United Kingdom Carbon Border Adjustment Mechanism (UK CBAM) is a carbon tariff on imports of certain goods produced with high carbon emission into the United Kingdom,^[15] similar to the European Union’s CBAM.^[16] It will cover slightly different goods, and will be rolled out in 2027.^[17] The sectors within scope are aluminium, cement, ceramics, fertiliser,^[18] glass, hydrogen, iron and steel.^[19][20] There are some differences regarding the type of emissions covered. Both EU and UK CBAM cover direct (‘Scope 1’) emissions. Regarding indirect (‘Scope 2’) emissions, the EU covers only emissions from electricity consumed during the production process. The UK CBAM proposals cover more indirect emissions, namely from heat, steam and cooling, as well as electricity.^[21]

California

California has a carbon border adjustment mechanism for imported electricity.^[22]