Non-EU companies importing carbon-intensive hydrogen and ammonia into the EU will have to pay a tax on the fuels later this decade, following a deal by EU lawmakers on the proposed Carbon Border Adjustment Mechanism (CBAM).

A test phase will begin in 2023, during which importers will be required only to measure and report the emissions produced in the manufacture of hydrogen imported into the EU.

Later in the decade, they will be obliged to purchase ‘CBAM certificates’ to pay for the difference between the carbon price in the country of production and the price of carbon allowances under the EU emissions trading system (ETS).

“The EU cannot afford to create additional obstacles in reaching the ambitious yet crucial goal of 10mn t/yr imports” Hydrogen Europe

The end of the test period has yet to be agreed, but the mechanism is likely to be fully phased in by 2030.

The CBAM will cover iron, steel, cement, aluminium, fertilisers and electricity, as well as hydrogen.

The length of the transition period and the timing of the CBAM’s full operation will be linked to the phase-out of free allowances under the ETS.

The end of free allowances will be negotiated later this week as part of the revision of the ETS, and the results integrated into the CBAM regulation.

The CBAM will cover all hydrogen production methods, including green and blue.

In an October position paper, industry body Hydrogen Europe argued the administrative burden for importers of hydrogen and its derivatives should be reduced to a minimum so as not to impede the development of a hydrogen market.

“The RepowerEU Plan to phase out Russian fossil fuels foresees the import of 10mn t of hydrogen and hydrogen derivatives annually by 2030. The EU cannot afford to create additional obstacles in reaching this ambitious yet crucial goal,” it says.

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Author: Tom Young