The EU could impose carbon tariffs to cover the environmental costs of certain imported products such as cement, a panel of member state officials said in a paper published Wednesday, potentially putting the issue back on Europe’s political agenda for the first time since it was quietly shelved in 2010.
While some think such tariffs could help make EU climate policy more effective, others say raising the issue risks sparking wider trade conflicts or threatens a global climate deal due later this year.
The recommendation was made in a letter dated May 13 by the chair of the High Level Working Group on Competitiveness and Growth published on the Council of the European Union website.
The panel of senior member state officials is tasked with giving guidance to the Council on how to implement the 2030 Climate and Energy package agreed by EU leaders last October.
The leaders agreed the bloc will set a 2030 target to cut greenhouse gas emissions by 40% under 1990 levels, and said carbon leakage protection measures in the ETS will not expire “as long as no comparable efforts are undertaken in other major economies.”
Big-emitting industries are currently protected against carbon leakage using a system to allocate free carbon allowances up to pre-determined benchmarks to those sectors deemed vulnerable – criteria that almost all sectors have met.
The European Commission is currently drafting proposals to rework the system after 2020. The Working Group’s advice could influence those proposals and the views of lawmakers that will eventually rule on them.
The Working Group paper said that some members of the group had suggested a “more careful and realistic definition of the benchmarks in order to prevent carbon leakage and excessive transition costs for European industry”.
“Carbon border adjustment could be set in a few other sectors (such as cement), to ensure a level-playing field between European production and imports, whilst allowing for the progressive reduction of free allocation in these sectors.”
RISK V REWARD
Some experts have argued that the effectiveness of EU climate policy is limited without carbon tariffs because lawmakers are too afraid to impose strict measures at home, fearing they will unfairly hit domestic industries competing in international markets.
Last year France suggested the cement industry could be a pilot sector for imposing tariffs on importers, an idea backed by EU cement producer association Cembureau.
But other industry groups fear border measures could provoke retaliation by third countries, as happened when the EU attempted to regulate aviation emissions on international flights using European airports in 2012.
“Import duties for the ETS are not the solution,” said Axel Eggert, director general of EU steelmakers’ association Eurofer, by email earlier this month.
“Europe is also exporting steel products which could then be targeted. Control and verification of imports will be difficult. And what about steel containing end-consumer products being imported into the EU? Would these be burdened as well? Very unlikely.”
Europe’s top climate official Jos Delbeke has also previously spoken strongly against the idea being considered ahead of delicate negotiations over a global climate agreement due at a UN summit in Paris in December.
“If we were to put a border tax on the table before Paris, it’s the recipe that could torpedo that process,” Reuters reported him saying last July.
The 2008 EU ETS Directive required lawmakers to consider the role of carbon border adjustments but the issue was eventually dropped.
INDIRECT LEAKAGE
The Working Group also recommended an EU-wide approach to tackling indirect costs of carbon leakage, such as higher power bills caused by utilities passing through the cost of buying their EUAs, which are currently only compensated for by six member states.
“Harmonised arrangements to compensate for indirect costs should also be taken at the Union level for the most exposed sectors,” it added.
By Ben Garside – ben@carbon-pulse.com
