By Susanna Twidale
LONDON (Reuters) – The European Commission announced plans on Wednesday for the world’s first carbon border tariff, which would impose emission costs on imports of goods including steel, cement, and aluminium.
The border levy would be phased in from 2026, the Commission said. The measure is designed to protect European industries from competitors abroad not subject to the same carbon costs.
A carbon cost can come in the form of a tax or via an emissions trading system (ETS), or cap-and-trade.
Around one fifth of the world’s emissions are covered by a carbon price, a May report by the World Bank said.
An ETS sets a gradually decreasing cap on the emissions a sector, or group of sectors, can produce. It creates “carbon permits” for those emissions, which companies must buy for each tonne of CO2 they emit. Some sectors are given free permits to help maintain international competitiveness.
Below are some of the major carbon emissions trading systems around the world.
BRITAIN
Britain launched a domestic ETS in 2021 after leaving the European Union scheme following Brexit. It covers power plants, aviation and energy intensive industries.
CHINA
A national ETS covering the power sector is set to launch this month. Already covering 4 billion tonnes of carbon emissions, or around 40% of China’s total, it is expected to expand to other carbon-intensive sectors, including steel and construction, in the next phase.
EUROPEAN UNION
The EU’s ETS, which started 16 years ago, is mandatory for all 27 EU members, plus Iceland, Liechtenstein and Norway, covering power plants, aviation and energy intensive industries. The European Commision on Wednesday also proposed that it be expanded to include shipping.
KAZAKHSTAN
Its scheme started in 2013. It was suspended in 2016 and relaunched in 2018 following reforms. It covers the energy sector, mining and chemical industries.
MEXICO
A three-year pilot scheme was launched in 2020 covering the power, oil and gas, and industrial sectors.
NEW ZEALAND
Its ETS, which began in 2008, covers electricity generators, manufacturers of liquid fossil fuels including petrol and diesel. Some forest owners are given free permits, others can voluntarily join the scheme.
QUEBEC
Its scheme was launched in 2012 and covers electricity and energy intensive industrials.
SOUTH KOREA
Its ETS started in 2015. It covers about 600 of the biggest emitters, collectively responsible for almost 70% of the country’s annual emissions.
UNITED STATES
The United States does not have a national ETS, but many regions and states use carbon pricing, such as California and states covered by the Regional Greenhouse Gas Initiative (RGGI): Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.
Sources: World Bank Group, International Carbon Action Partnership
(Reporting By Susanna Twidale; editing by Barbara Lewis and Gareth Jones)
