The EU’s trading partners have criticized the bloc’s plans to introduce the world’s first border carbon tax, saying they are protectionist and put export industries at risk.
The United States and South Africa are among countries that have said the Carbon Limits Adjustment Mechanism (CBAM), the world’s first major import tax on greenhouse gas emissions, would unfairly punish their manufacturers. Several developing countries have already started negotiating with Brussels for waivers, though the plans were only agreed this week and are due to be finalized this weekend.
“We are particularly concerned about things like border adjustment taxes, regulatory requirements that are being imposed unilaterally,” Ibrahim Patil, South Africa’s trade minister, told the Financial Times. “If it’s going to be something super important between the North and the South, you’re going to run into a lot of political resistance.”
“There are a lot of concerns coming from us about how this affects us and our trade relationship,” US Trade Representative Catherine Tay said at a conference in Washington this week.
The European Union views CBAM as central to its efforts to reach net zero emissions by 2050, arguing that it would simultaneously encourage countries outside the bloc to decarbonize their industrial sectors.
“CBAM is just a way to threaten third countries that they must also modernize their ambitions when it comes to climate,” said Mohamed Chahim, a Dutch socialist politician who led negotiations on the law for the European Parliament.
a temporary agreement On Tuesday, CBAM was reached with final details, including exact dates for its phase-out, which is due to be negotiated by EU lawmakers this weekend.
The tax will be required from importers Buy certificates to cover its emissions based on calculations linked to the EU carbon price. The sectors that will be affected by the tariff are iron and steel, cement, aluminum, fertilizers, hydrogen and electricity generation. A trial period is scheduled to begin in October 2023.
The EU plans to expand the scheme to other sectors, including cars and organic chemicals, if it is deemed successful.
Before Russia Ukraine invasionThese countries are expected to be the hardest hit by CBAM. Russian exports would have accounted for the largest proportion of imports from sectors affected by CBAM based on its imports from the EU between 2015 and 2019, according to Analytics by the Adelphi think tank in Berlin.
The almost complete cessation of imports from Russia due to the EU sanctions regime and the destruction of Ukrainian industry has shifted the burden to other countries.
China makes up about a tenth of the imports affected by CBAM, according to Adelphi, with Turkey and India being hit the hardest. China has repeatedly attacked the tariff since it was first proposed in July 2021.
In a thinly veiled reference to the measure, China’s interim chargé d’affaires in Brussels Wang Hongjian said in September that the EU should avoid “protectionism” when it comes to climate law. “Green cooperation cannot be promoted in a vacuum,” he added.
Developing countries with less economic heft and no emissions-measuring systems were more likely to suffer from the imposition of the tax, said Faten Akkad, senior adviser on climate diplomacy at the African Climate Foundation.
“The countries most likely to mitigate CBAM risks are those that already have an adequate carbon account in place,” she added. The result may be “deindustrialization” in African countries that export to the EU.
“A lot of these sectors risk losing business unless we put money into sustaining them and it’s very difficult to rebuild.”
while. Brazil’s steelmakers worry that CBAM will endanger domestic producers. Rather than ship their goods to Europe and face the tax, exporters may target less protected steel markets, such as South America.
“Our biggest concern is not exports to [Europe]But instead more materials are being diverted to the region, leaving the local industry “at risk,” said Marco Polo de Melo Lopez, CEO of the Aco Brasil Institute.
Anger over the measure was exacerbated by the European Union’s insistence that CBAM would encourage others to decarbonise, while not providing funds earmarked for helping poor countries invest in clean technologies.
CBAM proceeds are intended to enter the EU’s internal budget with a loose commitment to providing climate finance to countries outside the bloc, according to those familiar with the draft text.
A number of countries have already approached the European Commission to request more flexibility in applying the tariffs, according to multiple sources familiar with the discussions.
It would be “helpful,” said Baran Bozoglu, president of the Climate Change Research and Policy Association, a nonprofit think tank in Ankara. [for the EU] To provide various incentives, support and technologies so that the Turkish economy is not negatively affected.
He added that exporters would have to pay to account for and validate their carbon emissions in order to report to the EU. Having to cover this cost in addition to paying for CBAM, he said, was “a huge injustice”.
Additional reporting by Andy Pounds in Brussels and David Pilling in London