Essay by Eric Worrall
If Renewables are the cheapest form of energy, why does the EU need a carbon border tax to protect EU based industries?
Q&A: Can ‘carbon border adjustment mechanisms’ help tackle climate change?
The EU’s carbon border adjustment mechanism (CBAM) has been touted as a key policy for cutting emissions from heavy industries, such as steel and cement production.
By taxing carbon-intensive imports, the EU says it will help its domestic companies take ambitious climate action while still remaining competitive with firms in nations where environmental laws are less strict.
There is evidence that the CBAM is also driving other governments to launch tougher carbon-pricing policies of their own, to avoid paying border taxes to the EU.
It has also helped to shift climate and trade up the international climate agenda, potentially contributing to a broader increase in ambition.
However, at a time of growing protectionism and economic rivalry between major powers, the new levy has proved controversial.
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Analysis also suggests that the EU’s CBAM, in isolation, will have a limited impact on global emissions.
…
If nations lose carbon-intensive businesses because they close down or choose to do business elsewhere, this could harm the economies of nations trying to implement carbon pricing. At the same time, it could increase global emissions, if domestic manufacturing is simply replaced by more carbon-intensive imports.
Read more: https://www.carbonbrief.org/qa-can-carbon-border-adjustment-mechanisms-help-tackle-climate-change/
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The hallmark of cheap energy is you can manufacture products at a lower cost than other people. Why would anyone need a carbon tax on imports if their goods were already cheaper than everyone elses?
China dominates global manufacturing, because their low cost coal powered economy gives them a competitive edge.
If the cost of manufacturing an energy intensive product is 50% energy + 25% materials + 25% labor, halving the cost of energy reduces the manufacturing cost by 25%.
No such transformation is occurring in the EU. The EU is an economic hellscape, a place where ordinary consumers are punished with legally mandated higher prices thanks to carbon border adjustment taxes. The need for such a border adjustment tax is all the evidence anyone should need that renewables are a horribly expensive form of energy.
If renewables truly were delivering cheap energy to the EU, the EU would not need a border tax to prevent cheap imports from undercutting and wrecking EU based manufacturing. If renewable energy had any capacity to deliver cheap energy, renewable powered manufacturing hubs would be springing up across the EU, flooding the world with low cost energy intensive goods which even China would be unable to undercut.
Any day now, right? Do I need a /sarc tag?
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“The need for such a border adjustment tax is all the evidence anyone should need that renewables are a horribly expensive form of energy.”
It has nothing to do with whether renewables are expensive. It is a levy to discourage carbon-intensive imports. It restores balance for companies that are complying with internal carbon-restricting policies. It is just like if you have a VAT, then you have to have a balancing mechanism so people don’t just buy overseas where there is no VAT, to the detriment of your own companies.
Carbon intensive imports are CHEAPER.
The Tax is like the Trump proposed Tariffs on Chinese goods.
He’s not proposing tariffs to offset carbon intensity but to offset cheap goods produced from cheap energy and cheap or slave labor in China.
The balance is needed to normalize the disparity between costs of manufacturing in different countries and it’s net effect on end pricing.
Exactly – if renewable energy was cheap, carbon intensive goods would be more expensive, and there would be no need for a carbon border adjustment tax.
There’s no connection. They can use VRE across the border too, and probably do. It’s either an adjustment for a specific government impost, or a tax to discourage import of certain goods (they probably go together).
Nick, you are missing the point.
If Renewables helped make energy cheaper, goods produced using renewables would be cheaper than good produced using fossil fuel, and market forces alone would be enough to discourage the import of goods produced by fossil fuel powered economies. There would be no need for a carbon border adjustment to discourage the import of expensive goods from fossil fuel based economies.
The reason such a tax is required is because goods produced by fossil fuel powered economies are structurally cheaper than goods produced by Europe’s partially renewable powered economies.
Therefore renewables are an expensive form of energy.
And renewable generators still require Oil, Gas and Coal exploration and extraction for petrochemical stocks to produce those lightweight turbine blades and structural steel masts as well as silicon purification for solar.
I was just about to write the same when you beat me to it.
Nor would there need to be any government mandates banning the production of ICE vehicles and gas boilers and insisting on the use of EVs and heat pumps. The market would do the job for them.
yep
You people continually prattle on about how cheap renewables are, have been, and will be. You have to, because frankly, no one gives a fig about the alleged temperature in 2100. The only way you can get people to go along with your Net Zero nonsense is to brag about how much cheaper renewable electricity already is and how much even cheaper it will be.
So stop putting on this purist holier-than-thou face. No one believes it, not even you. I bet if I were to start trawling past articles for posts by you, bragging of cheap renewables would be one of the most common topics.
Be honest for once.
“Be honest for once.”
Never going to happen !! Deceit and disingenuous mal-information are Nicks’ stock in trade.
“It restores balance for companies that are complying with internal carbon-restricting policies.”
Nick, you just proved that goods produced with fossil fuels are cheaper than Leftist-driven wind and solar with higher all-in costs. Give us an estimate how much (as estimated by the UN IPCC reports) damaging climate change will cost society out to the year 2070 … you must include the benefits of CO2 greening and longer growing seasons.
Figure 12.12 “Emergence of Climate Impact Drivers” on P.90 of the latest 2021 UN IPCC Sixth Assessment Report (AR6) clearly shows that Hurricanes (Tropical Cyclones), floods, major Storms, tornadoes & etc. are not becoming more frequent, intense nor longer-lasting over what they have been during at least the past 120+ years globally. Yet the UN IPCC working people allow their socialist political masters, worldwide Leftist governments and their Deep States, anti-Capitalist academia, Crony Capitalist profiteers, radical NGOs and Marxist media to scream out lies that extreme weather events (that have always existed around the globe) are now all caused by increasing CO2.
By flogging hot-running CliSciFi climate models with the wildly unrealistic, politicized scenarios RCP8.5/SSP5-8.5, the IPCC says they will be able to recognize changes in extreme weather in another 50 to 70 years.
“It has nothing to do with whether renewables are expensive”
YES IT IS…
EVERY country in which there is a significant renewable infestation has massively high electricity and energy prices.
It is also to do with the erratic instability of wind and solar, which cannot EVER provide solid reliable electricity on demand.
Manufacturing cannot exist under that basis…. period.
Why on Earth would you need to do that if local renewable energy is so cheap?
Could it be that you are merely deflecting the argument with Whataboutism? You would never do that, Shirley?
It has nothing to do with cost of renewable energy. Likely the competitors are using VRE too. It’s a simple matter of tax balance. If you impose costs (tax) on the home industry, you have to make sure that they are not disadvantaged. Not only out of consideration for your people, but because without a border mechanism, the tax can be easily avoided.
You state:
You previously stated:
If carbon-intensive imports are more expensive, as you constantly claim, then there is no need of such a tax.
Or is the only reason carbon-intensive products are more expensive is taxes? Carbon-intensive products are actually cheaper to make?
Indeed, any need for any carbon tax demonstrates that renewable energy is more expensive than traditional energy sources.
Yet another tangled web being weaved, it appears.
If you impose Higher Energy costs on home industry you make them less competitive and must impose additional “Fees” on imports to raise their final cost to match and remain competitive
Yes, a win-win for tax collection…
A demonstration of astonishing naivety.
Or vapid pig-headedness.
Are you merely dense or being deliberately obtuse?
Why not both?
Your grasp of economics is miniscule if you truly believe what you just wrote.
Carbon is an element. It needs to be moved around in order to burn it (or do anything to it).
While “renewables are free”.
So why bother?
Renewables: Spanish industry’s competitive advantage
https://agendapublica.es/noticia/19145/renewables-spanish-industry-competitive-advantage
Or why do you think China is going renewable at lightning speed? They see the writing on the wall. But the fossil fuel oligarchs in the west can’t have their sheep escape the pen.
Yes, why do you think China is going renewable at lightning speed? Do you really believe that? Please cite some sources that include coal power increases for comparison.
Over half the world’s coal-fired power is generated in China.
China is the largest producer and consumer of coal in the world and is the largest user of coal-derived electricity.
2021 coal consumption = 86.17 exajoules, as compared to previous high of 82.48 exajoules in 2014
In 2022, China’s coal consumption grew by 4.6 percent to a new all-time high of 4.5 billion metric tons–nearly 9 times higher than the United States
In 2023, China’s coal consumption amounted to some 91.94 exajoules, up from 87.54 exajoules in the previous year. About a 5% increase.
China is building a lot of nuclear power plants but this will take time. The renewables will be phased out at the end their lifetime.
“The renewables will be phased out at the end their lifetime.”
Wind and solar.. They will probably keep their hydro.
Now that they have small pebble-bed nuclear up and running, they will certainly not bother wasting money on wind and solar.
In the last two years China has connected 2 nuclear power plants to it’s grid and currently has 8 such plants under construction according to the World Nuclear Association (Oct 2024)
Let’s just remind luser of China’s energy usage..
And globally Hydrocarbons use grew faster than wind and solar combined.
And Spain still get 2/3 of it energy from fossil fuels.
From your reference – “In 2023, the electricity mix included wind (25%), nuclear (24%), solar (19%), and hydro (4%). Fossil fuels accounted for less than half (with combined cycle gas accounting for 16% and coal a mere 2%). On 2 November 2023, Spain reached its renewable generation record of 73.3%. ”
So 44% Installed capacity achieved 73.3% of its energy mix? Remarkable. Or 44% achieved 73.3% capacity factor? Again remarkable. Or something else, not specified?
Demand goes up and down, so it is possible for renewables (44% installed capacity) on a good day to satisfy 73.3% of demand, when demand is significantly less than 100% of installed capacity.
Of course, good days don’t happen every day when it comes to renewables, which is a big part of why adding renewables to the energy mix drives up costs so much – you also have to pay fossil fuel energy providers to sit on their hands until they are needed.
IIRC the gas and coal fired power stations have to keep running at a lower level as they cannot suddenly get up to full power when needed.
It’s like having a taxi running outside your house, which you are paying for, in case your car won’t start.
Great analogy Stephen.
Funny how they ignore the basic accounting practice of amortization. The cost of the installation and maintenance are not recovered in the revenue stream, hence lower prices, but the money had to come from somewhere.
Normal accounting practice is to treat capital as a loan which must be repaid, the idea is for an investment to be considered an opportunity it must make substantially better returns than sticking your investment capital in a bank, or buying gold or treasuries.
That is why governments keep throwing money and market privileges at green energy, without lavish government funding the sums don’t add up.
China flogs their use of renewables to convince the West to embrace them and abandon fossil fuels, to China’s betterment. The graph in the pervious posts should give you a clue about what their real strategy is.
Oligarch? Given how ostracized the oil companies are in present time, they have little to no political standing.
oligarch
a very rich business leader with a great deal of political influence (particularly with reference to individuals who benefited from the privatization of state-run industries after the collapse of the Soviet Union)
For the record, there is a lot more money involved in solar and wind today than the oil companies are worth and much of that is coming from governments spending tax payer monies. Oligarch is a term much better applied to individuals in the government that are making these questionable expenditures (not to mention 10% for the Big Guy).
My bad. I forgot my 2 rules.
If Renewables are the cheapest form of energy, why does the EU need a carbon border tax to protect EU based industries?
Well it’s like this. The Gummint tells biz what’s required to change the weather so naturally they do as they’re told and lose money say like a billion dollars-
Hertz continues to suffer financially from bid to go electric, as J.P. Morgan downgrades stock | Just The News
Well naturally the Gummint feels it’s a bad look and might reflect badly on them so they have a choice to either splash some cash Hertz way or blame it on the Chinese and whack them for making it worse. Besides just like Hertz they’re running out of other people’s money and the Chinese don’t vote anytime anyway.
There is only one thing you need to know, fossil fuel and nuclear energy provide all of the power we will ever need, safely, in the amount that we need when we need it and at an affordable price. Wind, solar and storage can’t do it ever no matter how much you spend on it or mandate it.