The EU introduces a climate tariff

22.05.2025

Source: E & M powernews

The European Parliament has approved the Commission's simpler climate tariff. However, whether the climate tariff complies with global trade rules will soon be reviewed in Geneva.

The EU has made further progress this week on the road to "more climate protection with less bureaucracy". The European Parliament has approved the simplification of the climate tariff proposed by the Commission, known as CBAM (Carbon Border Adjustment Mechanism). This means that only importers who import more than 50 tons of CO2 per year into the EU will be subject to this levy. This refers to the carbon dioxide produced during the manufacture of imported goods.

If the Commission is to be believed, 99 percent of CO2 imports will still be covered by the CBAM despite this simplification. But it doesn't have to stay that way. The CBAM is being introduced gradually. Initially, the climate tariff will be limited to a few products: Aluminium, iron, steel, cement, fertilizers, hydrogen and electricity. Based on the experience gained with these products, the climate tariff will later also apply to more complex products.

Russia has lodged a complaint with the WTO

Whether the climate tariff complies with the rules of world trade will soon be reviewed in Geneva. Russia has lodged a complaint with the World Trade Organization (WTO) against the EU's plans.

The Achilles' heel of the CBAM is the data required to collect the climate tariff. This is also to be simplified. The import levy is calculated on the basis of the "direct emissions" that arise directly during production, for example of a tonne of steel, and the "indirect emissions" that arise during the generation of the necessary electricity. This data has been collected since October 2023.

Since January 2025, companies from third countries have been able to apply to the Commission to be approved as "authorized CBAM notifiers". From next year onwards, only products (not including electricity) from these companies may be imported into the EU.

When collecting data, the Commission is dependent on the information provided by manufacturers. Their data must be certified by accredited testing companies. The climate duty will only have an incentive effect if it is manufacturer-specific. This gives a country like China the opportunity to export products from new, climate-friendly factories and sell those from old plants - with high CO2 emissions - domestically.

The EU's climate tariff will not be levied until 2027. In the first year, it will only amount to 10 percent of the ETS price; in return, companies that produce steel or cement within the EU, for example, will only receive 90 percent of their certificates free of charge. In subsequent years, the CBAM will be gradually increased and the free allowances will be reduced to the same extent.

Great Britain to become part of ETS trading again

The cooperation agreement that the EU concluded with the UK this week also contributes to the simplification of emissions trading. It provides for the UK to be reintegrated into the European Emissions Trading System (ETS). This makes them the first third country willing to form a "climate club" with the EU. This means that the climate tariff for goods and electricity from the UK will no longer apply. In future, the UK will also be able to participate in electricity trading with the EU on an equal footing.

This will allow more low-emission electricity to enter the European electricity market. Around 70 percent of British electricity is generated from renewable energies or nuclear power, with only 26.6 percent coming from natural gas. The government wants to further expand wind energy and also export green electricity.

Belgium gets back into nuclear power

Nuclear power is also becoming acceptable again in Belgium. The Belgian parliament has now decided to phase out nuclear power once and for all. At the end of February, the government had already decided to extend the operating life of the last two reactors, which were due to be taken off the grid this year, until 2035.

This requires extensive investment, which the operator Engie is apparently only prepared to make if the Belgian state guarantees stable revenues until 2035. A contract for difference (CfD), which has been approved by the EU Commission, is intended to ensure this. The additional nuclear waste generated would be disposed of by the Belgian state for 15 billion euros. The Commission sees this as state aid. However, this is justified because it serves the security of supply.

The "strike price" was chosen in such a way that the operator could expect a normal market return and the risks would be shared between the Belgian state and the investors. However, it is not yet clear whether Engie shares this view and is prepared to continue operating the old reactors after 2025.

The government now also wants to examine the construction of new reactors, not least in order to achieve the European climate targets. However, no contractual partners are yet in sight.

Author: Tom Weingärtner