The EU will apply a carbon border tax on certain goods, including fertiliser but excluding beef, from 2023. Called the carbon border adjustment mechanism, the EU has said it will “ensure that European emission reductions contribute to a global emissions decline, instead of pushing carbon-intensive production outside Europe”.
The EU’s own analysis of the Farm to Fork strategy shows that EU beef production would fall by 15%. It concludes that beef presents a high risk of carbon leakage, meaning that the 15% lost from EU production would be replaced by production outside the EU.
To tackle this type of situation for a range of goods, the carbon tax is to level the cost of production between the EU and non-EU producer, preventing an advantage being secured through sourcing a cheaper non-EU option. Beef is not included in this phase of the tax, despite the EU research showing it is a sector where carbon leakage is likely to take place.
The tax will work in accordance with WTO rules and involve an EU importer buying a carbon certificate at the price that would have been paid had the product been produced under the EU rules.
Similarly, if the importer could show that the non EU goods had already paid the price for carbon used in production, in that they are aligned with EU rules, then the cost of the certificate would be discounted.