More items subject to EU's carbon tax

The European Union is set to add items, including garden tools and kitchen appliances, to its list of imports that will be subject to a new carbon tax.

The new tranche of items was identified during a review that had been set to conclude on Dec 10 but that will now be extended by at least a week, the Financial Times reported. It said two EU officials with knowledge of the review said there will also likely be new subsidies for European exporters of certain products.

The paper said the new measures will also likely include anti-circumvention measures aimed at preventing companies that sell things to consumers in the EU from avoiding the new taxes applicable under the bloc's Carbon Border Adjustment Mechanism, or CBAM.

The CBAM, which will be launched on Jan 1, currently calls for new taxes to be paid on imports of specific high-carbon commodities, including cement, iron, and steel, and for new taxes on some downstream items, such as aluminum, electricity, fertilizers, and hydrogen. But the latest amendments are likely to call for taxes to also be applied to finished products, including car doors and washing machines, based on how much carbon was emitted during their production, and whether the nation where they were made has a carbon tax in place.

At the end of the review, the proposed changes will still require a further formal review and a vote before they can be implemented, which would likely not happen for several months.

The FT said the EU sees the amendments as a closing of loopholes in a law that is aimed at avoiding a flood of cheap products into the bloc from companies able to undercut EU producers because they do not have to comply with climate regulations, and because they do not have to pay penalties for producing greenhouse gases.

Nations including the United States, China, and India have criticized the CBAM and said it is little more than a unilateral trade restriction disguised as an environmental measure.

The European Automobile Manufacturers' Association, or ACEA, has also criticized it, saying it could add to supply-chain costs, increase the administrative burden, and drive up the cost of cars. It added that the bloc has provided little information about how the new tax will be calculated.

"Our members import and process large volumes of steel and aluminum and their role in the proper functioning of the mechanism is crucial, given the need for operators to be able to properly and accurately report the embedded emissions of their imports," it said.

And Solar Power Europe said any expansion of the CBAM should be done slowly, to allow companies time "to adapt without causing product shortages or sudden price spikes".

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