Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Europe’s plan to tax the world into climate ambition

Europe’s plan to tax the world into climate ambition

The EU is readying a proposal to impose tariffs on those countries with lax climate policies.

While some world leaders prepare showy new climate pledges ahead of U.S. President Joe Biden’s Earth Day summit starting Thursday, the EU is arriving with a threat: do more to cut emissions or the world’s largest single market will make you pay.

European Commission Executive Vice President Frans Timmermans told a U.S. congressional subcommittee late Tuesday that Europe will protect its industries against carbon leakage — or competition from countries with lax climate rules — by setting a levy on high carbon imports, also known as a Carbon Border Adjustment Mechanism (CBAM).

"We are not telling people to go live in cold caves and munch on grass. Ours is a positive proposition," said Timmermans, who is preparing to roll out the European Green Deal, a sweeping policy package aimed at reaching net zero emissions by 2050.

But he warned that the risk of carbon leakage "increases as the EU raises its climate ambition above that of its trading partners."

Biden is expected to announce a new 2030 U.S. emissions goal this week, ahead of the climate summit of around 40 world leaders.

But the EU’s plan exposes the soft underbelly of Biden’s climate efforts — questions of whether he has the ability to transform any of his grand promises into law. That turns U.S. industry into a potential target of the EU’s trade measures.

The White House has been sending urgent messages to the EU that it wants Brussels to put its CBAM policy in the deep freeze.

State Department climate lawyer Sue Biniaz said the discussion with the EU was “fraught with complexity on both sides of the equation.” She said a U.S. carbon border tax was not an “extremely active possibility.”

Diplomatic tremors


The Biden administration also believes the EU proposal is potentially toxic and could undermine careful diplomatic efforts to get emerging economies to put forward new climate targets.

Several invitees to Biden’s summit have voiced concerns. Ministers from China, Brazil, South Africa and India called it “discriminatory.” China’s President Xi Jinping warned his French and German counterparts against it on Friday.

Australian Trade Minister Dan Tehan was in Brussels this week lobbying the EU against a potentially “protectionist” policy, which he told POLITICO was “like putting shutters around your economy.”

Yet the EU is determined to press on, even if that means going alone.

“We are open to discuss, team up, to join, but I don’t think this should derail the Commission from working on the proposal. The proposal will be adopted in June,” said an EU official.

In his written testimony, Timmermans told the House Foreign Affairs Subcommittee for Europe, Energy, the Environment and Cyber that the EU’s CBAM would start operating in January 2023 “at the earliest.”

The EU is now putting the final touches on its Climate Law meant to enshrine its 2030 and 2050 climate goals into Europe-wide legislation. That puts it way ahead of the U.S., China and other big polluters, but the risk of frontrunning is that some companies might seek less regulated environments. Brussels is keenly aware that neither this week’s meeting, nor November’s COP26 climate summit, are likely to spur efforts from every part of the globe. So as it starts to turn the screws on polluters at home, it is moving to protect itself from the inaction of others.

The EU hopes that the threat of the CBAM will be enough to get other countries to fall into line.

“Preferably, if every country would fulfill its Paris commitments, it would never have to be used,” said Timmermans.

How will it work?


Many details of the policy remain to be fleshed out. The European Commission is finalizing a study on the market impacts of a levy, but won’t release a detailed proposal until the end of June.

Brussels has always stressed the measure will be compatible with World Trade Organization rules, which means imported products cannot be subject to tougher measures than products produced at home.

That’s why the Commission’s preferred option is a system mirroring the Emissions Trading System (ETS), the EU’s cap-and-trade carbon market where EU producers pay for emissions, currently priced at more than €40 per ton of carbon dioxide. Importers would be required to buy permits for imports of certain goods. Countries with a similar carbon price — like Norway, Liechtenstein, Iceland, and possibly Switzerland and the U.K.— would be exempted.

That means the WTO is the least of Brussels' worries. Beijing and Washington are a much more immediate problem. If they feel discriminated by the EU's CBAM, it is unlikely they would wait for the WTO to decide whether the system is legal.

“There's some concern that U.S. industry could also get caught up ... because we don't have a carbon price on industry in the United States, and we're not likely to have one in the future,” said Samantha Gross, a foreign policy fellow at the Washington-based Brookings Institution.

The decision of which sectors to target will be highly political.

The scope of the scheme is likely to be limited at first. The Commission study looked at steel, aluminum, cement, power, and some chemicals used in fertilizers, but it’s still unclear which ones will actually be targeted. While power and cement imports are limited to some countries in the EU’s neighborhood, chemicals and steel are highly traded goods, which may trigger broader repercussions from source countries including the U.S. and China.

EU divided


For the moment there is also limited buy-in from the 27 members of the EU — the measure will eventually need the support of a weighted majority of EU countries.

France has been the chief proponent of the idea, with French President Emmanuel Macron putting it on the Commission’s agenda in 2019. But so far only nine countries — Austria, the Czech Republic, Denmark, France, Lithuania, Luxembourg, the Netherlands, Spain and Slovakia — backed a CBAM in an op-ed for POLITICO. The majority have stayed silent.

The elephant in the room is Germany, whose Economy and Energy Minister Peter Altmaier signaled he’s open to such a measure, breaking with his conservative party’s aversion to measures that could hurt Germany’s export-led economy. But a federal election in the fall means Berlin’s final position is unknown.

German industry is wary of unilateral moves that could trigger retaliation against its exports and upend trade relations. “Most of us see some sorrows if this instrument would be implemented against the will of major trading partners, like the U.S. and China,” said Carsten Rolle, head of energy and climate policy at industry lobby BDI.

“When you start to get to the details, it's an absolute bear to implement,” said Gross. “But nonetheless Europe seems quite serious about it.”

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
The Country That Got Too Rich? Public Spending Dominates Norway Election
EU Proposes Phasing Out Russian Oil and Gas by End of 2027 to End Energy Dependence
More Than 150,000 Followers for a Fictional Character: The New Influencers Are AI Creations
EU Prepares for War
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
Florida’s Vaccine Revolution: DeSantis Declares War on Mandates
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
"The Situation Has Never Been This Bad": The Fall of PepsiCo
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
The Fashion Designer Who Became an Italian Symbol: Giorgio Armani Has Died at 91
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Druzhba Pipeline Incident Sparks Geopolitical Tensions
Cost of Opposition Leader Péter Magyar's Economic Plan Revealed
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
×