The EU’s 27 member countries gave final approval Tuesday (25 April) to a sweeping reform of the bloc’s carbon market to accelerate the reduction in greenhouse gases, including a new carbon border tax on imports.

The sign-off, in a Luxembourg meeting of EU agriculture ministers, endorses a European Parliament vote last week on various legislative texts in the reform, which will come into force once published.

The European Union’s existing emissions trading scheme market will be broadened to include sea and air transport.

Carbon from individuals’ vehicles and homes will also be counted, though at a capped level until 2030.

And a special €88 billion social climate fund will be created in 2026 to compensate for the cost of Europe’s green shift.

EU approves CO2 tax on heating and transport, softened by new social climate fund

EU legislators agreed early on Sunday (18 December) to introduce a carbon price on buildings and road transport fuels, with a new €87-billion social climate fund established in parallel to cushion the impact on households and help them invest in green solutions.

The incoming legislation supports the EU goal of cutting 55% of greenhouse gas emissions in the bloc by 2030, compared to the levels recorded in 1990.

One measure that will be seen by companies importing into the EU will be a carbon tax on imports, phased in from 2026 and levied to ensure EU industries are not undercut by firms not facing the same added costs.

It will initially cover the most polluting sectors – producers of steel, aluminium, cement, fertiliser and electricity – and could be expanded in the future to organic chemicals and polymers.

The tax – formally called a carbon border adjustment mechanism – is expected to raise as much as €14 billion a year for the EU budget.

EU agrees carbon market overhaul in bid to hit 2030 climate goal

European Union negotiators reached agreement early on Sunday morning (18 December) to reform the EU’s Emissions Trading Scheme (ETS), the biggest carbon market in the world and the bloc’s flagship climate policy instrument.

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