Lhe carbon border adjustment mechanism (MACF) – often incorrectly called a “carbon border tax” – was adopted at the end of 2022 by the European Union. Even before its entry into force, it has caused a lot of ink to flow and is already causing our trading partners, such as European industrialists, to react.
While the European Union reformed its carbon market at the end of 2022 to make our industries pay more of the true price of CO2 – around 100 euros per tonne – it was inconceivable not to introduce an equivalent price for imports that compete directly with them. The MACF is therefore the counterpart of the reform of the carbon market. It covers six sectors (steel, aluminium, fertilizers, cement, electricity and hydrogen), which account for nearly 60% of CO emissions2 European industrialists. From 2026, i.e. after a period necessary for the technical implementation of the information and traceability system, a tonne of steel entering the Union will pay the difference between the price of CO2 due in the country of manufacture and the average price of the European carbon market the week preceding its entry.
To be compatible with the rules of the World Trade Organization (WTO), this mechanism must meet several conditions, which guided its design. On the one hand, to cover only the sectors which have a carbon price in Europe. This is the case with industry, but not, for example, with agriculture. This is why the integration of the agricultural sector in the mechanism was legally impossible. On the other hand, avoid “double protection” of our own industries. We touch here on the subject of free allowances, which were at the heart of the final negotiations, in December 2022, between the Council and the European Parliament.
Consistency
Indeed, almost all of our industries (94%) receive free allowances to cover all or part of their CO emissions2, which distorts the effect of the carbon price signal. It made sense, from a climatic point of view, to remove them. This will be done gradually, from 2026 to 2034. In return, the companies concerned will have the guarantee that their competitors who sell in Europe will pay the same carbon price as they do. But, of course, as long as companies producing in Europe continue to benefit from free allowances, the MACF will only apply to an equivalent part of imports, so as to ensure WTO compatibility. Part of the industrial world would have liked to have had the butter – the free allowances – and the butter money – from the importers paying a CO price2. Such a measure would, of course, have been reprehensible before the WTO.
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