The European Commission has launched public consultations on the revision of the Energy Tax Directive (ETD) and on the creation of a Carbon Border Adjustment Mechanism (CBAM). The revision of the ETD would revise minimum tax rates for fuels and current tax exemptions, to cut implicit subsidies for fossil fuels and some economic sectors and to better reflect the EU's climate ambitions. The CBAM would consist in a border tax on imports of some CO2-intensive products and would reflect more accurately the carbon content of imports, reducing the risk of carbon leakage and ensuring that EU's targets are not undermined by relocating goods productions to less ambitious countries. This mechanism would be linked to the EU emission trading scheme (ETS); the Commission is considering extending the ETS to imports, forcing exporters to the EU to buy carbon permits. It is also considering a carbon tax (VAT or excise duty) on products sold in Europe, which would affect both EU producers and foreign suppliers. The revision of the ETD and the CBAM could help the transition to a lower carbon economy and could contribute to financing the future EU budget, in the wake of the coronavirus pandemic.
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