European Parliament Approves Carbon Border Tax

Tuesday's vote caps nearly two years of negotiations aimed at pushing economies around the world to put a price on carbon-dioxide emissions while shielding the European Union's manufacturers from countries that aren't regulating greenhouse-gas emissions as strictly, or at all. The legislation allows importers of goods covered by the plan to deduct the price paid for overseas carbon emissions from the bill when goods arrive at EU borders.

The tax has aroused concerns in the U.S., where companies worry the plan would erect a web of red tape for companies seeking to export to Europe. It has also drawn criticism from China and parts of the developing world, where manufacturers tend to emit more carbon dioxide than their competitors in Europe and rely more on coal-fired electricity.

Importers will have to begin paying the tax in 2026. That date coincides with the phase-out of free allowances given to Europe's manufacturers under the bloc's emissions trading system. Legislation also approved Tuesday sets a schedule for completely phasing out free allowances between 2026 and 2034.

Write to Matthew Dalton at [email protected]