EU's border carbon levy.

 From Bloomberg

The European Union is planning to slap an import levy on steel, cement and aluminum produced in countries with lower environmental standards, as it seeks to become a world leader on climate without harming domestic producers.

In a move no other country in the world has taken, the European Commission wants to introduce a system imposing a penalty for bringing into the bloc emissions embedded in goods, according to a person familiar with the proposals due to be unveiled next month. The levy will be based on carbon costs domestic producers already face, and will also affect fertilizers and electricity.

Importers will have to buy special certificates at a price linked to the EU Emissions Trading System, the person said, asking not to be named commenting on private discussions. Carbon prices in that market have soared to records this year.

The planned measure is part of a broader package to be put forward on July 14, in a bid to align the EU economy with stricter emissions-reduction targets for 2030. The 27-nation bloc is tightening its environmental rules in an overhaul that will affect all areas from transport to energy production and trade. The overarching goal of the Green Deal is for Europe to become the world’s first climate-neutral continent by the middle of the century.

The EU wants to hit two birds with one stone: provide a level playing field for its businesses and encourage more climate action from countries outside the bloc. But its plans are already causing diplomatic unease in countries from Ukraine to China and India. The planned levy will be proposed just five months before a crucial climate summit hosted by the U.K., where coalition-building will be key to ensuring major emitters step up their efforts.

If the proposal escalates trade tensions, the CBAM may wind up being a tool the EU wields rather than a full-blown penalty for imported pollution that eventually gets extended to cover more sectors. The EU has already learned a trade and climate lesson when it included flights to and from Europe in its carbon market last decade, putting a price on every ton of CO2 discharged by planes. Following an uproar and threats of retaliation from Brazil to the U.S., Russia and China, the EU backtracked, scaling down its program.

In the most optimistic scenario painted by some analysts and EU diplomats, Europe’s plans would lead to the creation of a “climate club” across continents. That would need endorsement from the U.S. administration, which hasn’t decided yet what regulatory approach to follow to reduce greenhouse gases.

This makes a lot of sense.  There is no point in slashing your emissions, only to have them "outsourced"  to countries without a carbon price.   There'll be pushback, but the EU is determined to get to zero carbon by 2050.  Small countries with lots of trade with the EU will find it easier just to give in, impose their own carbon price, and also impose carbon taxes on imports from third countries, so the percentage of the world where a price for carbon applies will steadily grow.