Europe faces global scepticism about its carbon border tax

From The Global Warming Policy Forum

Date: 05/07/21 Reuters

The European Union faces an uphill battle to convince trading partners that the world’s first levy on carbon imports is fair, workable and a necessary part of the bloc’s attempted green revolution as opposed to a protectionist tool.

The EU is due on July 14 to unveil a package of legislation to cut net greenhouse gas emissions by 55% by 2030 from 1990 levels.

As part of the plan, it will outline what it terms a carbon border adjustment mechanism (CBAM), designed to cut emissions by creating financial incentives for greener production and by discouraging “carbon leakage,” as the transfer of operations to countries with less onerous emission restrictions is known.

The bloc will want to avoid the type of fallout it incurred after a separate environmental move in 2018, when it excluded palm oil from its list of sustainable biofuels and sparked legal challenges from Indonesia and Malaysia at the World Trade Organization.Report ad

Before that, an EU attempt to charge foreign airlines for carbon emitted on flights in and out of Europe threatened a trade war after the U.S. aviation industry mustered fierce political opposition and China said it would withhold aircraft orders. The European Union was forced to announce in 2012 it would suspend the law.

Bernd Lange, chair of the European Parliament’s trade committee, said the CBAM could prove the source of trade disputes – notably with the United States, if Brussels does not find an agreement with Washington.

“We have to look to an understanding so that this CBAM will not land in a WTO case. This is a big task for the next months,” he told a webinar.

The Commission has said its plan will be WTO-compatible and fair, requiring importers of goods such as steel to buy emissions certificates at the same price as domestic producers.Report ad

However, a demand by EU producers that they continue to benefit from free EU carbon market certificates could create problems if imports are not afforded a similar advantage.

A draft of the July 14 proposals shows free permits would end, but manufacturing sectors are expected to lobby hard to retain them. 

Benchmark prices on the EU’s emissions trading system (ETS), the largest carbon market in the world, have this month hit records above 58 euros a tonne, partly in response to expectations of the border levy.

While the EU says it and Washington have agreed to discuss the plan, other countries have signalled concerns. Australian Prime Minister Scott Morrison calls any carbon tariffs “trade protectionism by another name”. Russia has said it may break trade rules. 

Andre Sapir, a senior fellow at Brussels-based think tank Bruegel who has testified before parliament on the CBAM, says the European Union needs to look beyond mere legality.

“There’s the issue of fairness too. Advanced countries have been long-term emitters. Deforestation, advanced countries did it too,” he said.

BURDEN OF PROOF

The WTO grants preferential treatment to developing countries, as does the EU with arrangements for the poorest states. If they do not extend to the CBAM, charges could hit $16 billion of developing country exports to the EU, the Centre for European Reform think tank says.

Even a WTO-compatible system with allowances for emerging countries could disrupt trade if it adds an unwieldy administrative burden.

Companies in countries, such as South Korea, with existing emissions trading schemes might smoothly adapt to the CBAM. Elsewhere, exporters would need to provide extensive data on their direct carbon emissions and those of their energy sources and then convince the European Commission the data is reliable.

Otherwise, they could face an unfavourable default calculation.

“The burden of proof is on the other side,” said Hosuk Lee-Makiyama, director of trade think tank ECIPE. “CBAM may be a great gambit for trade negotiations, but will it actually incentivise cutting CO2 emissions?”

The system’s complexity has persuaded the European Commission, initially at least, to concentrate on a few basic materials – iron and steel, aluminium, cement, electricity and fertilisers, which represent about 5% of EU goods imports.

However, there may be ways for exporting countries to circumvent these. Thijs Vandenbussche, climate policy analyst at think tank the European Policy Centre, points to possible substitutes, such as fuel ash or blast furnace slag, for cement, which may not be subject to carbon charges.

Read the full article at the GWPF here.

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Steve Case
July 5, 2021 2:17 pm

The Cartoon by Josh says it all.

July 5, 2021 2:24 pm

That’s the way to create “Green” jobs, as the bureaucrazycracy will overflow

markl
July 5, 2021 2:26 pm

Should be interesting how the tax varies between nations. Like everything else the EU does to promote fairness this should fail as well with chosen winners and losers.

Willem Post
Reply to  markl
July 5, 2021 7:06 pm

If Trump were President, he would say to the EU: “Bring it on, and we will respond accordingly.”

End of EU carbon dreams.

Last edited 3 months ago by Willem Post
Tom Abbott
Reply to  Willem Post
July 6, 2021 12:53 pm

Exactly right.

dk_
July 5, 2021 2:45 pm

Self-defeating. The EU Net-Zero fantasists will drop this the second they realize that they’ll get no more essential imports from the CCP — the single greatest source of greenhouse gasses.

markl
Reply to  dk_
July 5, 2021 4:49 pm

They’ll be exempt as a developing nation!

Bryan A
Reply to  dk_
July 5, 2021 8:20 pm

That EU Net-Zero could be rewritten as
EU Net-Zed
OR
EU Net-Z
EU Netzies

AGW is Not Science
Reply to  Bryan A
July 12, 2021 9:24 am

Why not just be open and honest about it?

EU Net-Zero Nazis.

AGW is Not Science
Reply to  dk_
July 12, 2021 9:23 am

Fixed it for you…

The EU Net-Zero fantasists fascists will drop this the second they realize that they’ll get no more essential imports from the CCP — the single greatest source of greenhouse gasses.

n.n
July 5, 2021 2:56 pm

Carbon border tax? Immigration reform. “Net zero”: one woman, one man, two-child policy.

DMacKenzie,
Reply to  n.n
July 5, 2021 3:55 pm

And only when another family has all expired….

john
July 5, 2021 2:56 pm

It’s all evil! OT but just got this article I’d like to share. Wonder if our resident geologist, David, has seen it?

Geologic activity on Earth appears to follow a 27.5-million-year cycle
The Earth has a pulse.
https://www.google.com/amp/s/www.techexplorist.com/geologic-activity-earth-appears-follow-27-5-million-year-cycle-2/39916/%3famp
A spectral analysis was performed on the ages of 89 well-dated major geological events of the last 260 Myr. These events include times of marine and non-marine extinctions, major ocean-anoxic events, continental flood-basalt eruptions, sea-level fluctuations, global pulses of intraplate magmatism, and times of changes in seafloor-spreading rates and plate reorganizations.

Rich Davis
Reply to  john
July 5, 2021 3:09 pm

This was beat up pretty well here on WUWT last week

Geoffrey Williams
Reply to  john
July 5, 2021 5:40 pm

What has that to do with the price of rice or bread ? !
Man just get real . . .

Bill Rocks
Reply to  john
July 6, 2021 8:17 am

Subjective selection of events. You can make your own list and write a paper.

Rich Davis
July 5, 2021 3:00 pm

This may be the end of the WTO or the beginning of the realization that Net Zero isn’t going to happen.

Rich Davis
July 5, 2021 3:03 pm

We need a CPOW to go with the CBAM. Like on the old Batman TV series.

Waza
July 5, 2021 3:04 pm

Germany imports iron ore, coal and steel. It then manufactures steel and exports manufactured goods such as cars made from steel.
German car companies have factories around the world that manufacture and assemble their cars.
Realistically it is impossible to allocate which company/subsidiary is responsible for the carbon emissions of each product.
However it will be possible for these multinational car manufacturers to use creative accounting to milk the system.
Essentially large companies will not be burdened by the tax( they may even benefit) while small independent companies will be severely penalised.

Rich Davis
Reply to  Waza
July 5, 2021 3:14 pm

That would be shocking. Do you really think that woke big business would try to game the system that is going to save the world? Like they’re just going to skim money off a system and let The Childrun die? How dare they?

Yeah /sarc
Of course that’s exactly the plan.

KcTaz
Reply to  Waza
July 5, 2021 6:03 pm

Rich, you mean that’s not the point of all this?
This started long ago. Remember Enron?
The U.N.’s Global Warming War On Capitalism: An Important History Lesson
http://bit.ly/2GSWjIH

…Enron’s Leading Kyoto Promotion Role
Between 1994 and 1996, after Senator Wirth became undersecretary of state for global affairs in the Clinton-Gore administration, he began working closely with Enron to lobby Congress to grant EPA the authority to control CO2. By the 1990s, Enron had come to own the largest natural gas pipeline that existed outside Russia, a colossal interstate network. But since that fuel that was facing difficult market competition with coal, the company sought some needed help in Washington to tip the playing field. Mounting national hype about a global warming crisis promulgated by then-Senator Al Gore’s highly publicized 1988 congressional hearings on the subject provided a dream opportunity.
Senator Wirth and John Heinz (R-PA) had recently cosponsored “Project 88” to provide a pathway for converting environmental issues into business opportunities. Media-fueled alarm about acid rain had provided a basis for legislation to create markets for buying and selling excess sulfur dioxide (SO2) and nitrogen dioxide emission credits, and Project 88 became the Clean Air Act of 1990.
Since Enron had become a big SO2 market cap-and-trade player, this led that company and others to wonder… why not do the same thing with CO2? Since natural gas is a lower CO2 emitter than coal, that development would certainly be a profitability game changer. But there was a problem. Unlike SO2, CO2 wasn’t a pollutant-at least not then- and the EPA had no authority to regulate it.
A September 1, 1998 letter from Enron’s CEO Kenneth Lay to President Clinton requested that he “moderate the political aspects” of the climate discussion by appointing a “Blue Ribbon Commission”. His intent was clear: to trash climate crisis disbelievers and cut off debate on the matter. Lay had direct contact with the White House earlier when he reportedly met with President Clinton and Vice President Gore on August 4, 1997, to prepare a U.S. strategy for an upcoming Kyoto climate summit that December. Kyoto presented the first step toward creating a carbon market that Enron desperately wanted Congress to support.

In late 1997 Enron Lobbyist John Palmaisano wrote excitedly from Kyoto: “If implemented, [the Kyoto Protocol] will do more to promote Enron’s business than almost any other regulatory initiative outside restructuring of the [electricity] and natural gas industries in Europe and the United States…The endorsement of emissions trading was another victory for us…This agreement will be good for Enron stock!!”
Sadly (for Enron), that was not to be. In a rare spirit of solidarity, the Senate unanimously passed (95-0) a bipartisan Byrd-Hagel U.S. Senate Resolution (S Res 98) that made it clear that the United States would not be signatory to any agreement that “would result in serious harm to the economy of the United States”. Then-President Clinton, no stranger…

Waza
July 5, 2021 3:14 pm

Australians will remember
#1 the Labor Party’s goal of trying to create a super mining tax. Most mining companies came out and said we don’t mine, we produce. The costs associated with digging the raw ore and then processing on site can not be separated.

#2 the Liberal Party’s introduction of Goods and Services Tax GST.
Products such as milk, flour and eggs were exempt.
They lost the election because they couldn’t explain how much GST was on a cake.

Complicated taxes such as the CBAM have no possible way of being calculated fairly, they are just a fraudulent way of redistributing money.

WXcycles
Reply to  Waza
July 9, 2021 6:56 pm

Oh come on the Libs lost because the electorate chose to keep Keating over an academic wet-wipe like John Hewson. The libs backed the wrong man as anyone should have been able to defeat Keating after 1992. there was no reason to even go hard for GST until after an election. It became an issue only because Hewson wanted it to be an election issue … wrong guy.

Last edited 3 months ago by WXcycles
Coeur de Lion
July 5, 2021 3:26 pm

Cannot someone explain to these idiots that CO2 emissions are controlled by Asian fossil fuel consumption, that EU emissions are trivial, that CO2 does not drive the climate anyway? Madness

TonyL
Reply to  Coeur de Lion
July 5, 2021 3:59 pm

You cannot explain this to a country as small as New Zealand, you have no hope of getting the EU to understand. New Zealand has gone to total self-destruction with their CO2 emissions policies, and we watch the EU do the same.

Prediction #1:
The EU puts CBAM in place, international trade goes into chaos and virtually shuts down, whole EU economies crumble. In response, the EU blames the rest of the world for engaging in “Unfair Trade Practices”.

So predictable.

WXcycles
Reply to  TonyL
July 9, 2021 7:06 pm

New Zealand has gone to total self-destruction with their CO2 emissions policies

Not if NZ has a rich business and political elite who are ultra-left newspeak exponents who suck-up to the CCP endlessly as their national economic ‘strategy’.

Apparently there is no other customer for their produce … they think.

Rud Istvan
July 5, 2021 3:34 pm

Some observations from an old (now literally) business pro who lived in Munich for almost 6 years from early 1978 to late mid 1983, who traveled almost the entire EU and consulted to many of its leading corporations during that time.

Based on my hard won knowledge, the EU never made sense. Even less so the Euro, because a monetary Union without a financial policy Union will always fail, as Greece proved, and Italy eventually will. Why US has a FederalReserve Bank.

How the EU imagines this proposed CBAM will work is delusional. No different than their Euro (€) hope. The UK was right not to surrender the £, and righter to BREXIT before the EU ‘Titanic’ founders on Teutonic rigidity, French arrogance (joke, almost unused French WW2 rifles for sale—once dropped, never fired), and Italian ‘avoidance’—one estimate is that 25% of the Italian economy is ‘dark’.

An affirming Italian ‘dark’ anecdote from about 1980. We were doing a global survey of a VERY big German multinational’s global portfolio. As partner leader, I chose to personally supervise just Italy and Brazil. So went to the Italian subsidiary HQ, explained everything (corporate strategy training day), then handed them the per business questionaire (Fragebogen, auf Deutsch). Weeks later Italy handed in over one hundred separate questionnaires, which we then ran thru our (unknown to them) quality control software. ALMOST PERFECT scores despite tricky questions designed to high lite potential uncertainties—impossible. So I flew back down and confronted them. They sheepishly admitted that they had held a senior management weekend questionaire filling out party with good food and wine. Then they said, you know, we were careful only to use the German books we submit to corporate in Munich. I said, what? Since they by then knew I was on their side, they said, well, we keep 3. One for Germany, one for the Italian tax authorities, and then the one we use to actually run our businesses here. I realized there were NO strategic business problems in Italy worth any further investigation. Very nice dinner afterwards. Molto Echo Bene.

KcTaz
Reply to  Rud Istvan
July 5, 2021 6:06 pm

Rud, great story. I enjoyed it very much. Thank you.

July 5, 2021 3:34 pm

The obvious problem of course is Europeans will be the ones who pay EU’s carbon tax, not the exporter. Germany is not self-sufficient for food imports, thus foods imported from outside the EU with a carbon tax will simply pass the tax on to German consumers.

As far as exports in US the Demorats have no ability to impose a carbon tax on exported oil or natural gas. say if they wanted to tax Gulf coast oil and gas producers’ export of fuels. The US Federal government cannot tax exports – US Constitution Article 1, Section 9. para 5.

Last edited 3 months ago by joelobryan
DMacKenzie,
Reply to  Joel O'Bryan
July 5, 2021 4:19 pm

Joel, you got it ! They know every tax they can think of gets passed along to the end user…..they only have to make it sound like its a tax for good purposes along the way. Carbon tax, CBAM, whatever. Then they will hire unemployed people and give them jobs inspecting, accounting for, or supervising their neighbor’s government subsidized recycling and greenhouse gas activities. Whole buildings full of people will be required, as big as the banking system, because it will handle a large portion of the money in the economy, since it takes a lot of money to fight the weather. It will be a highly paid job for those in charge. Of which they will take at least 60% in various taxes. That’s what the GND is all about. “They” are the woke eco-crats in charge.

Last edited 3 months ago by DMacKenzie,
John Bell
Reply to  DMacKenzie,
July 5, 2021 4:59 pm

You nailed it! Gawd…that image, of high rise office buildings full of eco-crats. How much longer at this rate will it take Europe to tax itself to death?

Nick B
July 5, 2021 4:05 pm

It’s probably ends up in usual way.
When ROHS directive was introduced, then REACH, then so on, there are about hundred banned chemical substances. If you are manufacturer, you should make chemical or XRF analysis. Expensive. But… if you outsource almost everything, leaving just final assembly, then all you need from your third party is letter of conformance with CEO signature.
Chinese companies provide such letter easily. No analysis was really done.
Everybody happy.

Rob_Dawg
July 5, 2021 4:42 pm

> “We have to look to an understanding so that this CBAM will not land in a WTO case. This is a big task for the next months,” he told a webinar.

In what universe is a unilateral tariff derived from weak climate science applied unequally via an arbitrary process not going to end up in the WTO?

And:

> “…the EU says it and Washington have agreed to discuss the plan…”

Sounds like a treaty to me. Won’t pass the Senate.

Drake
Reply to  Rob_Dawg
July 5, 2021 8:59 pm

he Paris accord sounds like a treaty too, and was being implemented by OBiden the 1st without submitting to the Senate.

If Dems are in the White House, they will do as they please. Luckily TRUMP! appointed a LOT of judges, and some will issue nation wide injunctions as the cases get to court.

at Keystone, 15 BILLION suit over the Obiden permit revocation, that should get to the SCOTUS and Keystone should win.

Geoffrey Williams
July 5, 2021 5:37 pm

Personally I don’t give a tosh about co2 emissions nor climate change ! ! !

KcTaz
Reply to  Geoffrey Williams
July 5, 2021 6:09 pm

Neither do I, Geoffrey, but that doesn’t mean we won’t have to be paying for this nonsense. We already are in various ways and Biden will make it a lot worse, if he can.

griff
Reply to  Geoffrey Williams
July 6, 2021 1:08 am

Just keep ignoring the drought, ice loss, heatwaves, fires, floods and storms and hurricanes. Nothing to see there.

Timo V
Reply to  griff
July 6, 2021 2:31 am

Yes! It’s terrible! There was none of those when i was young, we must stop them!

griff
Reply to  Timo V
July 6, 2021 8:29 am

Well in the UK there were certainly less floods and flash floods and damaging storms and fewer heatwaves than when I was young

MarkW
Reply to  griff
July 6, 2021 8:44 am

Of course real world data completely refutes what griff is paid to believe.

Lrp
Reply to  griff
July 6, 2021 10:08 am

Evidence? Oh, you’re griff and you just make pronouncements.

JCalvertN(UK)
Reply to  griff
July 8, 2021 12:41 pm
Rob_Dawg
Reply to  griff
July 6, 2021 3:54 am

Ohoooohhh! Now the magic molecule can time travel.

bizzarogriff
Reply to  griff
July 6, 2021 3:55 am

Yes, griff there is definitely nothing to see there, you just keep ignoring the data that shows none of that is increasing… In spite of the fact that the powers-that-be are constantly redefining things to make comparison more difficult, like declaring previously undetectable “fish storms” tropical cyclones, and heat waves are now also counted by days of elevated minimum temperatures, in their own turn ignoring the elevated UHI that the last 40-50 years has wrought.

DaveS
Reply to  griff
July 6, 2021 5:23 am

Repeating nonsense over and over doesn’t make it any less nonsensical.

griff
Reply to  DaveS
July 6, 2021 8:30 am

Exactly what I tell your fellow posters going on about marxist/leftist plots to undermine the West via climate science etc

MarkW
Reply to  griff
July 6, 2021 8:45 am

So your leaders were lying when they proclaimed that their goal was the over throw of capitalism in order to install a socialist paradise with themselves in charge?

TonyG
Reply to  MarkW
July 6, 2021 1:31 pm

Notice how griff didnt’ respond at all on the article about the marxist solution?

MarkW
Reply to  griff
July 6, 2021 8:44 am

You are absolutely correct about there being nothing to see there.
Everything you list is well within the range of normal. There isn’t the slightest bit of evidence that CO2 is impacting anything.

TonyG
Reply to  griff
July 6, 2021 1:33 pm

Griff:
How much drought should there be in a proper climate?
How much ice?
How many days of heatwaves?
How many fires?
How many floods and how big?
How many storms?
How many hurricanes?

You want something to be different, but you never define your desired end goal. All you want is “NOT THIS”. Can you please define a target?

William Capron
Reply to  griff
July 6, 2021 1:54 pm

At last, another species heard from!

Rory Forbes
Reply to  griff
July 6, 2021 9:30 pm

Nothing to see there.

At least you got one thing right. Well done you … for once.

KcTaz
July 5, 2021 5:56 pm

I’m going to take a wild guess and assume China is going to be classified as a developing nation even though they have one of the highest GDP’s in the world and have been sending stuff to outer space, right, or wrong?
Besides the utter stupidity of this, it would seem that it’s going to hit European consumers the hardest while the rich get richer.

Steve Richards
Reply to  KcTaz
July 6, 2021 8:19 am

China is and will remain classified an a developing nation.

Quilter52
July 5, 2021 8:10 pm

Well of course it’s a Protectionist tool Imposed by protectionist fools.

n.n
Reply to  Quilter52
July 5, 2021 8:57 pm

The protectionist racket past, present, and progressive. While some do it to compensate for labor arbitrage (e.g. immigration reform), others do it to compensate for environmental arbitrage (e.g. Green policies).

griff
Reply to  Quilter52
July 6, 2021 8:28 am

Commentators and news outlets have largely called Trump’s economic policies protectionist and generally opposed to free trade…

MarkW
Reply to  griff
July 6, 2021 8:46 am

Commentators and news outlets have admitted that they lied about Trump.

Lrp
Reply to  griff
July 6, 2021 10:10 am

Yes, people like you, absolutely clueless

Rory Forbes
Reply to  griff
July 6, 2021 9:36 pm

Commentators and news outlets blatantly lied and invented fake news about Trump for 5 years. They even bragged about it when the government changed hands from Trump’s successful term of office to the O’Biden farce with a mentally deteriorating degenerate in charge.

Gordon A. Dressler
July 5, 2021 8:18 pm

According to World Bank data, in CY2020 the EU had about 44% of its GDP associated with exports, and about 41% of its GDP associated with imports.

Therefore, if EU trading partners respond with their own “carbon border tax” at an equal % effective tax rate, this policy will result in an essentially zero-sum game . . . except for the monies wasted on additional governmental bureaucracies all around.

griff
July 6, 2021 1:10 am

The EU of course has a larger population than the USA and 3 of the world’s top ten economies in it. More economic power than the USA these days, forward looking and investing in infrastructure, without the USA ‘s gun violence and drug problems and unequal society and racial issues.

bizzarogriff
Reply to  griff
July 6, 2021 4:00 am

Sorry, Griff, but we all (should) know that the EU isn’t the population, it is the constellation of black holes that are the EU bureaucrats, regulatory systems, and taxes. Remind me, how many of these are elected?

griff
Reply to  bizzarogriff
July 6, 2021 8:26 am

The members of the European Parliament, for a start

MarkW
Reply to  griff
July 6, 2021 8:47 am

You mean the Parliament that has no power.

Reply to  griff
July 6, 2021 7:55 am

What do you dream at nights ? 😀

MarkW
Reply to  Krishna Gans
July 6, 2021 8:47 am

He dreams of a world in which he is recognized as the leading light his mother always told him he is.

Lrp
Reply to  griff
July 6, 2021 10:14 am

This is cognitive dissonance at its best. Weren’t you saying you’re not a socialist?

Tom Abbott
Reply to  griff
July 6, 2021 1:10 pm

“The EU of course has a larger population than the USA and 3 of the world’s top ten economies in it.”

And the U.S. pays for most of their defense. Trump did make the NATO partners pay more, but they are still way behind in their mutual defense payments, so the U.S. has to carry them.

Maybe if they had to pay their own way, they wouldn’t have such a high-ranked economy. Not paying your bills does make you a little richer.

John in Oz
July 6, 2021 3:56 am

The US can afford this as they all saved $0.16 on their July 4th BBQs.

Shoki Kaneda
July 6, 2021 6:18 am

Just another form of Euro-protectionism. Any excuse to the contrary is a lie.

Gary Pearse
July 6, 2021 11:45 am

So what about EU companies that shifted ops to China to avoid these sort of costs? Should these countries give the CBAM tax to the HQ companies in EU to pay?

Here’s where BoJo could take advantage in trade by not imposing the tax. Does EU understand who ultimately will pay this tax. Actually economics and free enterprise are counter to the continental mindset which has never let go of fascination with Marx. Austrians for some reason are an exception to this.

ResourceGuy
July 7, 2021 8:22 am

It’s what the EU was built for, carbon is just a handy excuse.

WXcycles
July 9, 2021 7:36 pm

Rightist … humans are great they should prosper and flourish wherever possible.

Leftist … humans are terrible they should be suppressed and impaired wherever possible.

Centerist … humans are OK though I’d prefer a lobotomized drone.

Conservative … humans change too much, it’s dangerous, there should be a law against it.

Progressive … humans need new ideas, especially if they don’t work, and are totally insane.

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