EU expands carbon border tax to include auto parts, drawing trade partners' criticism

ANKARA

The EU is expanding its Carbon Border Adjustment Mechanism (CBAM), which will be applied to imports of high-emission products, to include auto parts and washing machines.

The European Commission announced the new measures on Wednesday to strengthen the mechanism, intended to fight climate change, and tackle circumvention practices.

Under the proposal, as of Jan. 1, the mechanism will apply to around 180 steel- and aluminum-intensive products, including items used in heavy machinery, construction equipment, and household appliances.

This extension focuses on goods further down the production chain, requiring importers to pay for embedded emissions in materials like aluminum, cement, electricity, steel, fertilizers, and hydrogen.

Imports with misreported emission levels will be subject to higher carbon prices to prevent misreporting, and importers will be required to provide additional details about their production processes and materials.

Currently, importers are only required to report volumes and embedded emissions, but starting on Jan. 1, they will have to purchase CBAM certificates equivalent to those emissions under the full regime.

The plan has faced sharp criticism from major trading partners, who argue that the expanded CBAM could complicate global trade and act as a disguised barrier.

The US has expressed concerns that the mechanism acts as a trade barrier, potentially damaging transatlantic relations and global climate cooperation.

China has labelled it protectionist, saying it disadvantages developing economies and could prompt retaliation, likely affecting the competitiveness of its steel exports to Europe.

European manufacturers, particularly in the auto sector, have supported the move, saying it will create fairer competition by shielding local low-carbon products from cheaper, higher-emission imports.

The European Commission intends to direct 25% of CBAM revenues between 2028 and 2029 toward supporting EU companies that invest in low-carbon technologies, bolstering the bloc's green industrial policy.