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European Carbon Tax Comes into Effect
Starting January 1, 2026, the European Union will implement a border carbon adjustment mechanism expected to have a limited impact on international trade.
Currently, this mechanism applies to less than 5% of the EU’s imports of essential products such as steel, aluminum, cement, and fertilizers.
According to projections from the Organisation for Economic Co-operation and Development (OECD), the mechanism currently targets only 303 products, representing about 3% of total EU imports. The International Monetary Fund estimates that this percentage may rise to 4.5% based on trade data from 2021.
The World Trade Organization believes that imported high-emission products to the EU will become less competitive, potentially granting a larger market share to products manufactured within the Union. The organization also anticipates that this trend will shorten global value chains due to increased import costs.
The greatest concern focuses on industries involved in the later stages of production chains, which rely on taxed raw materials, as they may face rising costs and loss of competitiveness. This concern is heightened by the concurrent implementation of the carbon adjustment mechanism and the gradual reform of the emissions trading system, which aims to reduce compensation mechanisms until 2036.
