Carbon Tariffs and EPR
Border carbon tariffs were first initiated as a resolution adopted by the European Commission in 2021 to protect the EU’s domestic industry from the risk of carbon leakage, by creating a level playing field vis á vis ownership of carbon dioxide from manufactured products, and to serve as a policy tool for encouraging exporting countries to reduce their greenhouse gas (GHG) emissions. Goods that are considered at high risk of carbon leakage include cement, certain fertilizers, iron, steel, and aluminium. Carbon Border Adjustment Mechanism (CBAM) will apply from January 2026 to these products, and will be extended to other imported products. The methodology to be used for determining a product’s carbon footprint is based on embodied direct and indirect emissions released during the production of a good. Further information is available here.
Carbon costs paid at home would be deducted from the total cost of EU border carbon certificates, hence it will be imperative that exporters identify all carbon minimisation and offsetting options for their raw materials, processes, packaging, and waste streams.
Many other jurisdictions have since commenced developing and enacting national resolutions to protect their industries from carbon leakage. It has now been widely recognised that such tariffs based on embodied carbon exported from one country to another poses the greatest threat to economic performance and even the viability of industries who do not take appropriate action to reduce risks with carbon leakage.
Extended Producer Responsibility (EPR), also known as Product Stewardship, is an environmental management strategy that holds whoever designs, produces, sells, or uses a product, responsible for minimising the product’s environmental impact throughout all stages of the product lifecycle, including end-of-life management. The greatest responsibility lies with whoever has the most ability to affect the full life cycle environmental impacts of the product. This is most often the producer of the product, although responsibility is carried through all stages of the supply chain. In many countries product stewardship is enforced through local and/or national regulations, although in Australia it remains largely voluntary for industries concerned. Further information is available here.
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