London
CNN
—
European Union governments have reached an agreement on the world’s first major carbon frontier taxas part of an overhaul of the bloc’s flagship carbon market that aims to make it an economy carbon neutral by 2050.
EU ministers finalized details from Carbon Border Adjustment Mechanism early Sunday after reaching a tentative deal earlier in the week.
The landmark measure adds a pollution price on certain imports to the European Union. Carbon-intensive industries inside the bloc must meet strict emissions standards, and the tax is designed to ensure such companies are not undermined by competitors in countries with weaker rules.
The measure will first apply to steel, cement, aluminum, fertilizers, electricity production and hydrogen before being extended to other goods.
It also discourages EU companies from moving production to more tolerant countries, which EU lawmakers call “carbon leakage”.
Under the new mechanism, companies will have to buy certificates to cover emissions generated by the production of goods imported into the European Union based on calculations linked to the EU carbon price.
Mohammad Chahim, a Dutch socialist politician who led the negotiations on the law for the European Parliament, said in a statement that the measure will be a “crucial pillar” of European climate policies.
“It is one of the only mechanisms we have to incentivize our trading partners to decarbonize their manufacturing industry,” he added.
But the plan has faced resistance from countries like the United States and South Africa, which are worried about the impact border carbon taxes could have on their manufacturers.
“There are a lot of concerns on our part about the impact this is going to have on us and on our trade relationship,” U.S. Trade Representative Katherine Tai said at a conference in Washington last week, according to the FinancialTimes.
The European Union and the United States have already opposed President Joe Biden’s $370 billion climate plan under the Cut Inflation Act, which EU officials say will hurt to European companies selling on the American market.
In a nod to the challenge posed by the Cut Inflation Act, the latest EU agreement makes more money available for the development of clean energy technologies in Europe.
The EU carbon measure could lead to “rapid deindustrialisation” of African countries that export to the European Union, warned Faten Aggad, senior climate diplomacy adviser at the African Climate Foundation.
Another risk is that clean energy capacity in poorer countries will simply be shifted to producing exported goods while industry for local consumption relies on dirty fuels, Aggad said on Twitter. She added that certified carbon emissions in producing countries remains a “challenge”.
The carbon border tax is part of a wider deal agreed on Sunday that reforms Europe’s carbon market to cut emissions by 62% by 2030, compared to 2005.
The EU’s carbon market, known as the Emissions Trading System (ETS), already limits greenhouse gas emissions from more than 11,000 power and manufacturing plants, as well as of all EU domestic flights, covering some 500 airlines.
Companies receive or buy emission permits or “quotas”, which can then be traded. The ETS, which was extended on Sunday to dispatchis key to the European Union’s bid to become the world’s first carbon-neutral continent.
As part of the latest reforms, the amount of free emission allowances will be phased out between 2026 and 2034. The carbon border adjustment mechanism will be gradually implemented at the same time, thus protecting domestic companies against foreign competition.
After nearly 30 hours of discussions, negotiators also agreed to launch a new carbon market for heating and transport fuels from 2027, with the possibility of postponing it for a year if energy prices remain at current high levels.
“This agreement will make a huge contribution to tackling climate change at low cost,” Peter Liese, the European Parliament’s chief negotiator, said in a statement. The agreement “will send a clear signal to European industry that it pays to invest in green technologies”, Liese added.
The European Parliament and the European Council will have to formally approve the agreement before it enters into force in 2026.
0 Comments