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EU to tax emissions from imports

DUBAI, United Arab Emirates (AP) — A European Union plan to tax the carbon pollution emitted to make goods imported from countries like India and China has sparked a debate at the United Nations climate conference in Dubai, as poorer countries fear such tariffs will harm livelihoods and economic growth.

Through the tax, the EU hopes to set a price on the carbon emitted to make energy-intensive products like iron, steel, cement, fertiliser and aluminium in other countries. The aim is to both reduce emissions from imports and create a level-playing field for goods made in the European bloc that must meet stricter green standards.

The issue strikes at a core dilemma that policymakers are grappling with — and haggling over — at the COP28 climate conference in Dubai: How to get the world to go greener without upending more-fragile developing economies.

Developing countries are worried that the tax under the EU’s planned Carbon Border Adjustment Mechanism would harm their economies and make it too expensive to trade with the bloc.

“CBAM’s sole aim is to prevent carbon leakage” elsewhere in the supply chain, European Commissioner for Climate Action Wopke Hoekstra told reporters at the COP28 conference. He said the tax is crucial for funding and achieving the EU’s climate goal of slashing emissions 55 per cent by 2030.

A recent study by the UN Conference on Trade and Development found that a tax of USD44 per tonne of carbon emitted would slash pollution from the supply chain by half. It also estimated that rich countries would make USD2.5 billion from the tax, but poorer countries might lose up to USD5.9 billion.

Others in wealthier countries including Britain, Canada and the United States are looking to follow suit.

Senator Sheldon Whitehouse of Rhode Island and Representative Suzan DelBene of Washington, both Democrats, on Wednesday reintroduced legislation to create the “Clean Competition Act” that would similarly set a fee on imports from high-carbon emitting producers.

Whitehouse, at a panel event Sunday at COP28, praised CBAM as “the brightest star in terms of emissions reduction in our firmament right now.”

“This bill is the effort to do our piece of creating that international carbon pricing regime,” he said, expressing hopes to cut through “a blockade of fossil-fuel dark money and influence in Congress.”

Responding to the worries in the developing world, Whitehouse said such measures would generate revenues for climate justice and improve the pathway toward “climate safety” — the lack of which would “fall far more heavily on the people in the economies and the countries that have fewest resources.”

“I have zero remorse about CBAM from a climate justice point of view,” he said, insisting that his legislation would both grant exemptions to the least-developed countries and focus on the worst polluters in any given industry.

India’s government is one of those strongly opposed to the idea. Former steel secretary Aruna Sharma has urged the government in New Delhi to continue to oppose the tax, but said industries do need to invest in lowering their carbon footprint for both exports and domestic goods.

Mohamed Adow, the founder-director of Power Shift Africa, an independent think tank based in Kenya, called carbon taxes a “trade weapon” that could negatively affect Africa. He estimated the European measure could lead to a loss of at least USD25 billion in trade revenue for his continent.

Li Shuo, director of China Climate Hub at the Asia Society Policy Institute, said: “This issue is a significant concern in international climate politics. It’s not going away, and lives are at stake.”

There’s also a technical concern: Vaibhav Chaturvedi, a research fellow at the Council on Energy, Environment and Water in New Delhi, said that under the UN climate change rules, countries cannot dictate how others should reduce emissions. Carbon taxes go against that rule, he said.

Trade and climate policy experts say many developing countries fear being shut out of Western markets because they won’t be able to clean up their businesses fast enough. They also worry about being caught in conflicts between China and the West, with China seen as the primary target of the EU’s carbon tax.

But K R Raghunath, founder of clean energy solutions company KIS group, said that even though a carbon tax could be “painful” for some countries in the short-term, it will still have a positive impact because it will reduce planet-warming emissions.

“It will be good for everyone in the long run,” he said. “Ultimately, everybody has to reduce their carbon emissions.”

Trucks carry aluminum alloy frames to Adani Green Energy Limited’s Renewable Energy Park near Khavda, Bhuj district near the India-Pakistan border in the western state of Gujarat, India, September 21. PHOTO: AP
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