European Parliament backs carbon border tax plan

BRUSSELS (AFP) – The European Parliament on Wednesday overwhelmingly endorsed the creation of a carbon border tax that would shield European Union (EU) companies against cheaper imports from countries with weaker climate policies.

The non-binding vote was an early step in a long path to setting up the tax plan, which faces a very difficult ratification with opinions widely diverged among the bloc’s 27 member states.

The border tax is seen as a key part of the EU’s Green Deal, a push to achieve carbon neutrality by 2050 and meet the targets of the Paris Climate Agreement.

The mechanism is intended to make sure that imports from outside Europe do not have an unfair advantage if manufactured with a bigger carbon footprint.

The concern is greatest for heavy industry such as steel-making, where European countries face tough competition from cheaper Chinese imports that are made with lower environmental standards.

To level the playing field, non-European products would need to buy pollution permits from the EU’s own carbon emissions scheme, known as the EU emissions trading system or ETS.

Carbon prices have reached records in the EU, a new development after years of ineffectively low prices that failed to incentivise heavy industry to go green.

This was in part due to free allocations of permits handed to Europe’s energy intensive sectors like cement and steel-making.

Those freebies will have to be phased-out if the border tax is to comply with rules at the World Trade Organization (WTO), a move that Europe’s big industry is fighting against.