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1st carbon border tax is coming. What it means for the U.S.

A leaked draft of the European Union's plans suggests that leaders of the 27-nation bloc are looking to target carbon-intensive imported goods. Those include steel, aluminum, iron, cement, fertilizers and electricity. Under the mechanism, mostly non-E.U. companies who want to sell those goods in the European Union would need to buy certificates that would be linked to the E.U. Emissions Trading System and based on E.U. carbon prices. The certificates would cover the carbon emissions embedded in the production of the goods. The policy would apply to imports from countries that do not have a price on carbon, including the United States. Countries with a carbon price would be eligible for a credit from the authority that oversees the carbon border adjustment, according to the draft document. The mechanism, which is expected to be officially released next month, is aimed at protecting European producers' competitiveness against countries with weaker climate policies. It's also meant to encourage other countries to put a price on carbon, said Shuting Pomerleau, a climate policy analyst at the Niskanen Center.

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