The European Union becomes the first leading economy to legislate on a “green tariff” on imports | world Trade

[ad_1]

In the early hours of Tuesday morning, the European Union became the first major economy to enact a “green tariff” on imports, imposed on goods produced with high carbon dioxide emissions.

The Carbon Limits Adjustment Mechanism (CBAM) means that countries that fail to green their industries will soon face a new threat: an effective carbon tax that will penalize those who hope to profit from high-carbon activities, forcing them to clean up.

The system will initially be applied to iron and steel, cement, fertilizers, aluminum, electricity, hydrogen and some chemicals.

“The mechanism to adjust carbon limits is an essential part of our climate action. This mechanism promotes the import of goods into the EU by non-EU companies that meet the criteria,” said Josef Sekela, Minister of Industry and Trade of the Czech Republic, who led the negotiations in the EU Parliament. “The high climate climate applied in the EU’s 27 member states. This will ensure a balanced treatment of such imports and is designed to encourage our global partners to join the EU’s climate efforts.”

The agreement is still tentative, and details still need to be ironed out by member states and other institutions. But if all goes according to plan, the confidence-building measures will come into force on a trial basis from next October.

However, initially, there will be no financial or other penalties associated with the EU’s CBAM – companies will only be required to report emissions linked to the production of the goods they wish to sell.

Frans Timmermans, vice-president of the European Commission, told the Guardian: “We will demand a massive transformation from many parts of our industry. If the other [countries] Don’t do it – if they don’t live up to what they pledged to do under the Paris Agreement – the risk of carbon leakage is high. You’ll see European industry move elsewhere, to places where they don’t have to comply with stringent standards, to emit CO2 there. This would render our climate action useless.”

Pascal Canvin, chair of the European Parliament’s Environment Committee, hailed the move, saying: “The agreement is the first of its kind in the world. For the first time, we will work to ensure fair treatment between our companies, which pay for carbon in Europe, and their foreign competitors, who do not. This is a step Major changes that will allow us to do more for the climate while protecting our businesses and our jobs.”

The move, announced as part of the EU’s Green Deal, a major push to meet the EU’s tough climate targets, could be the first push in the global carbon trading war – or the first step toward a fair global effort to cut greenhouse gas emissions in line with Urgent scientific advice. The US and UK are considering how to respond, but the countries hardest hit by Europe’s moves are likely to be those with high-carbon export industries such as China, Turkey, India and possibly Australia.

Russia faces its own sanctions and penalties based on its aggression in Ukraine, but it can also be targeted by CBAMs.

The move should also be seen in the context of the EU-US row over inflationary law. President Joe Biden’s Climate Act contains hundreds of billions of dollars in incentives for green industries, which some EU member states have seen as an act of aggression that could undermine the EU’s appeal for green investment.

The United States said the EU should develop its own incentives. Without naming the US, Kanvin explained that CBAM was also part of the EU’s response, saying the aim was to make Europe a “sovereign green power”.

While the initial CBAM requirements will apply to only a few sectors, Kanvin made it clear that the EU Parliament has many more in its sights. “We also provided for the future integration of manufactured products, such as automobiles,” he said. “The message to our industries is clear: there is no need to relocate because we have taken the necessary measures to avoid unfair competition and carbon leakage.”

Camille Morey, industry decarbonization policy officer at conservation group WWF, said the agreement was “half-baked”, however, and should be expanded to address the free CO2-producing permits that are allotted to some companies under the current EU carbon trading scheme.

The interim agreement on CBAM has some good stuff about the scope and emissions covered. Now talks will intensify over the overlap with pollution free permits intended for industry under the EU’s ETS [emissions trading system]She said. “To act as a real alternative to carbon leakage protection measures, and push industry in the EU to decarbonize, participating lawmakers will have to finally agree to uphold the ‘polluter pays’ principle by phasing out half of the polluter free permits for CBAM sectors by 2030, and by 2032 They must not budge from the pressures of industry while we are in a climate emergency.”

Lord Stern, a climate and development expert, believes the tariffs should apply narrowly to certain high-carbon industries, such as steel. Steelmaking traditionally involves a high use of fossil fuels, but some companies have shifted to “green steel”, using electric arc furnaces and in some cases hydrogen as fuel. Carbon frontier taxes on steel could spur the investment needed for more business to follow suit.

“CBAMs have to be smart,” Stern said. “It should be simple in definition and operation and focus on a narrow set of related industries such as steel and cement. If you make it clear to other countries what you have in mind, and that they won’t be affected if they have the right policies, then you can have a constructive dialogue. But if you use it as a blanket protectionist That would be divisive. It is important to recognize that other countries may pursue sustainable growth and emissions reductions in different ways, and you should not insist that every country uses a carbon price, despite the great value of this policy tool.”

A government spokesperson said: “Domestically, as we move to net zero, the UK recognizes the importance of addressing carbon leakage risks to ensure our ambitious decarbonization policy is not undermined. The government is exploring a range of policies that can mitigate carbon leakage risks in the future. The government has committed to consult on This, including whether measures such as product standards and the mechanism for adjusting carbon limits can be appropriate tools in the UK policy mix, and will do so in the spring.”

[ad_2]