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EU leaders risk trade tension with carbon border tax plan to shield industry
(Reuters News, 2 Oct 2019) The new European Union executive risks inflaming international tensions over trade and the environment even before it takes office in November by promising a carbon border tax to shelter its industry from the cost of cutting emissions.
Previous European Commissions have resisted calls, led by steelmakers and traditionally protectionist France, for a carbon levy on imports to protect Europe’s relatively clean and expensive manufacturers from competition from cheaper production elsewhere.
But fresh momentum has come from increased prices in the EU Emissions Trading System (ETS), the European Union’s flagship instrument for making polluters pay, as well as a rising tide of protectionism led by the United States.
Until now, the Commission has handed out free ETS permits to tackle industry’s complaints it is subject to “carbon leakage,” the term used to refer to the possibility high EU compliance costs will drive manufacturing to lower-cost parts of the world.
But from 2021, companies will receive fewer free permits, boosting their costs just as they face investing in expensive new technology to enable the EU to reach a goal of climate neutrality by 2050, in line with the Paris Agreement on curbing global warming.
Some lawyers say the Commission must be prepared to be pulled into trade conflicts or European industry will be destroyed.
“Either the EU prepares itself for and accepts the risk of retaliation or it simply allows other countries to continue with a major artificial advantage which will increasingly destroy EU manufacturing,” Laurent Ruessmann, Brussels-based partner at Fieldfisher law firm, said.
Reuters News, 2 Oct 2019: EU leaders risk trade tension with carbon border tax plan to shield industry
