Thursday, March 11, 2021

Climate Change: The EU moves on border adjustment

The European Parliament has voted to support a border carbon tax, forcing imports from polluter countries to pay the full cost of their carbon emissions:

On Wednesday, Parliament adopted a resolution on a WTO-compatible EU carbon border adjustment mechanism (CBAM) with 444 votes for, 70 against and 181 abstentions.

The resolution underlines that the EU’s increased ambition on climate change must not lead to ‘carbon leakage’ as global climate efforts will not benefit if EU production is just moved to non-EU countries that have less ambitious emissions rules.

MEPs therefore support to put a carbon price on certain goods imported from outside the EU, if these countries are not ambitious enough about climate change. This would create a global level playing field as well as an incentive for both EU and non-EU industries to decarbonise in line with the Paris Agreement objectives.

Initially the tax will apply to sectors covered under the European ETS (energy generation and energy-intensive industries like cement, steel, aluminium, oil refinery, paper, glass, chemicals and fertilisers), and will involve imports from countries without an equivalent mechanism paying the EU carbon price at the border. Coverage will expand as the ETS expands. This will pose no problems for New Zealand - our ETS covers more than the EU one does - but Australia is squealing (they're also squealing because the EU has said there will be no free trade agreement until Australia acts on climate change).

This is a move we should encourage. Domestic action keep s being undermined by the potential for pollution to shelter behind climate cheats, but the solution isn't to weaken action, but to punish the cheats and prevent those businesses from gaining any advantage. I'm glad the EU has finally recognised this. The obvious question is why aren't we doing the same?