In a bid to make the European Union a climate-neutral region, EU officials announced the launch of the first phase of a new emissions tariff program yesterday.

All European Union importers are now required to report the greenhouse gas emissions embedded in the production of imported iron, steel, aluminium, cement, electricity, fertilisers and hydrogen.

European Economy Commissioner Paolo Gentiloni declared that the goal of the new policy is to encourage a global shift to greener production and prevent European Union producers from moving production to countries with more lax regulations.

The Carbon Border Adjustment Mechanism is designed to prevent more polluting foreign products from undermining the region’s green transition. New regulation will potentially protect local producers from losing out to foreign competitors, while they invest in meeting EU targets to cut the bloc’s net emissions by 55% compared to 1990 levels, by 2030.

During the first phase, until 2026, Brussels does not plan to collect any CO2 emissions charges at the border and will just collect data on carbon-intensive imports, but starting on January 1, 2026, the importers will have to buy certificates to cover these CO2 emissions.

Carbon border tax requirement will inevitably increase the final cost of products imported by the bloc, reducing their competitiveness compared to goods manufactured domestically.

New emmissions tafiffs scheme has already faced criticism from EU’s major trading partners, who claim it undermines free trade. It has also added to trade tensions between Brussels and Washington, with the latter asking earlier this year for US steel and exports to be exempt from tax.