Writing for EU Observer, Frances Li rails against the EU’s new carbon tariff carbon border adjustment mechanism (CBAM). She notes:
“The EU prides itself in its progressive values, including its commitment to sustainable development. However, its incoming deforestation regulation and carbon border adjustment mechanism (CBAM) disproportionately burden developing countries–and within them, smaller and medium sized companies (SMEs) in particular.
As part of the European Green Deal, CBAM — a tariff on carbon-intensive imports — will fully take effect in 2026. Ideally, the mechanism will help to drive corporate investment into decarbonisation in the EU’s trade partners.”
She thereby adds:
“Indian steel producers are some of the most at risk companies to the CBAM. India is a significant exporter of steel to the EU and Indian steel production is largely reliant on coal — a carbon-intensive fuel source. Within India, large industrial conglomerates are much better placed to deal with the EU’s green regulations. Tata Steel, a subsidiary of the Tata Group and one of the biggest players in the steel sector, already has production facilities in Europe and has described the CBAM as “an opportunity”.”
Good to see GoI speaking the only language EU understands. Hit finished goods from EU with tariffs and subsidize IND exports to EU for CBAM. Let them whine to the WTO. pic.twitter.com/PFus79cjZn
— Diva Jain (@DivaJain2) March 21, 2023
Over the Summer, Gerassimos Thomas, director general for taxation and customs union within the European Commission defended the proposed carbon border adjustment mechanism (CBAM) in its meetings with Indian officials.
According to Ajay Seth, India’s economic affairs secretary, the Indian government vehemently disagrees with the EU: “Their suggestion is not practical. Their team had come and met us … the solution they are offering doesn’t work for a developing economy like India.”
Good Morning from Germany where Chancellor Olaf Scholz is shifting Germany's focus towards #India as the country seeks to reduce its econ reliance on #China. Right now, Germany exports nearly €16bn worth of goods to India annually, which doesn’t even put India in Germany's top… pic.twitter.com/94H6DM8JLC
— Holger Zschaepitz (@Schuldensuehner) October 25, 2024
Meanwhile, also in the UK, the government is considering to copy the EU’s CBAM. There, a new study by the UK Growth Commission warns that if the UK were to do this, it “could lead to GDP per capita losses of between roughly £150 and £300”, or even up to £650, in case supply chains would realign around the lowest cost producers.
The researchers have also calculated the benefits of the approach of replacing the Paris Accord with a “Climate and Freedom Accord”, estimating these at £1,000 per capita. Such an accord would entail replacing the collectivist “Paris Agreement” with a “Climate & Freedom Accord“. Signatories to this international treaty would benefit from trade advantages, provided that they implement climate-friendly free-market policies.
Another new study, by the Warsaw Enterprise Institute and like-minded think tanks, proposes this.
Signatories to this international treaty would benefit from trade advantages, provided that they implement climate-friendly free-market policies.
The think tanks argue this would “de-bureaucratise the economy”, along with “tax changes (…) to make investing in PP&E (Property, Plant, and Equipment) more profitable in a way that incentivises companies not only to maintain their current capacities but also to modernise and develop new projects. Subsidies of any kind should be abolished in an orderly and gradual manner.”
Other suggested measures signatories to such an international treaty could introduce are tax-exempt “CoVictory bonds” as well as targeted tax cuts (Clean Tax Cuts, CTCs) in the four sectors responsible for 80% of greenhouse gas emissions—transport, energy and electricity, industry, and real estate. Tax cuts aimed at breaking up monopolies are another possible measure.
Such an alternative climate policy approach is unlikely to receive a lot of sympathy at COP29, the upcoming Climate Summit of the UN in Baku, Azerbaijan. Certainly at the EU level, there is no support for this, at the moment. On the contrary, the EU is in the process of expanding the reach of its “emission trading system”, which effectively serves as a climate tax. Observers are now closely watching the outcome of the EU’s attempts to install a CBAM climate tariff, and to what extent this affects the European Union’s international trade ties.
great read: A Free Market Clean Sweep for the Climate Policy Mess https://t.co/yWAs0qdsv5 via @brussels_report @Berlin_affairs
— Berlin Kommunikation- Government Relations (@Berlin_affairs) October 20, 2023