New climate legislation approved by the EU

On Tuesday (April 18, 2023), the European Parliament approved a reform to the Emissions Trading System (ETS) that aims to reduce greenhouse gas (GHG) emissions, gradually eliminates free quotas for companies, creates specificities for the fuel, road transport, and buildings sectors, and also includes GHG emissions from the maritime sector in the ETS and proposes a review for the aviation sector.

The creation of the Carbon Border Adjustment Mechanism (CBAM) was also approved, which aims to gradually implement a tax on imports of steel, cement, aluminum, fertilizers, electricity, and hydrogen. Importers of these goods will have to pay the price difference between the carbon price paid in the country of production and the price of carbon quotas in the European Union.

These measures are part of the European Union's "Fit for 55 in 2030" climate package, which aims to reduce GHG by at least 55% by 2030 compared to 1990 levels, according to the European Climate Law.

The legislation still needs to be formally approved by the Council of the European Union, but Brazilian producers and exporters need to be aware of the practical consequences that these measures will have on the international market.