France is persevering with its efforts to introduce, at EU level, a carbon border tax on imports into the European Union, in particular from countries such as China and India.
On April 15 2010 French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi sent a joint letter to European Commission President José Manuel Barroso asserting that the commission should include carbon border tariff measures in its report on carbon-emitting sectors, which is due in June 2010. A study is to be included in the report which will assess the economic impact of raising Europe's emissions reduction targets to 30% (from the present level of 20%) by 2020.
Some EU member countries are concerned that their industries, which pay for permits to emit carbon dioxide, will lose out to cheaper imports from countries which impose no such charges, including China. In addition, the European Union is working on a proposal for an internal minimum carbon tax by updating the EU Energy Taxation Directive (2003/96/EC). This would impact industries which fall outside the carbon dioxide permit system (ie, the EU Emissions Trading Scheme).
Originally adopted in 1992 as part of the European Union's efforts to build the internal market, the directive sets minimum tax rates for energy sources such as petrol, coal and natural gas to apply to their use as motor and heating fuel or for producing electricity. Under the existing law, the tax to be paid is calculated according to the quantity of fuel that is consumed. Algirdas Šemeta, EU commissioner for taxation and customs, wants this changed so that the tax is calculated according to carbon dioxide emissions and the energy content of the fuel that is consumed.
With further changes relating to carbon dioxide emissions in the pipeline, carbon border tariffs have been floated as a way of preventing European industries from relocating to countries where environmental laws are less exacting and manufacturing costs are cheaper. Such tariffs would be highly controversial despite the Italian and French premiers' acknowledgement that any tariff should respect World Trade
Organization commitments.
In April 2010 France lobbied in Washington for the introduction of a carbon border tax.
French environment minister Jean-Louis Borloo stated that he will aim to reach an agreement with President Obama on a measure to ensure that a joint position is agreed by June 2010. The French minister is convinced that border tariffs would not contravene international trade rules if they were properly constructed and introduced with the intention of levelling the playing field, in order to reflect the corresponding minimum carbon taxation on EU industry.
Traders in the import-export business may be relieved to hear that support for the Franco-Italian position is not universal. In 2009 Germany criticized the idea of carbon tariffs, although it acknowledged that the European Union must take alternative action on the risks related to so-called 'carbon leakage'.
The commission has been more adamantly opposed to the introduction of border tariffs. Karel de Gucht, on being questioned in the European Parliament prior to taking up his role as trade commissioner, warned that a carbon border tax could lead to a trade war. Thus, he rejected out of hand the idea of a border tax adjustment based on carbon.
Dissent has also come from other quarters of the commission. For example, EU Climate Action Commissioner Connie Hedegaard has stated that reaching an international deal on climate change is the priority and that the time is not right for the introduction of a border tax on carbon dioxide.
Barroso has previously stated that "it would be neither good environmental policy nor economically viable if energy-intensive industries were to leave Europe and emit emissions, perhaps even higher ones, outside Europe". However, he has remained non-committal on how these concerns will be addressed, stating that a number of options are being considered (eg, allocating emissions trading scheme allowances to
third country markets).
The commission's opposition suggests that no border tariffs will be imposed in the near future. However, as support grows for their introduction, the picture could change radically.
Originally published in ILO newsletter on 10th of may. Republished with author's authorization.
