Brussels begins work on the new CO ₂ tariff

The European Commission has started the work to implement a carbon tariff, launching a public consultation on the mechanism, which aims to prevent the relocation of the Community industry to countries without costs linked to _CO2 and eliminate the advantage of products imported from those countries.

The tariff – technically called the “carbon adjustment mechanism at the border” – is one of the star proposals of the European Green Deal, which won the support of the European Parliament to the current president of the European Commission, Ursula Von der Layen.

Another of the proposals of this Pact is a new European Climate Law, whose first draft has been presented on Wednesday in society. As reported by elEconomista, it has lowered its ambition in relation to the _CO2 reduction targets for 2030, delaying the decision to increase them from the current 40% to 50% or 55%.

Well, Brussels has taken advantage of the presentation of the aforementioned bill – a legal figure unprecedented in European legislation – to launch the consultation on the carbon tariff, along with another consultation on the revision of the Energy Taxation Directive, adopted in 2003 and so outdated that it is “irrelevant”, according to the expression used by the Community technicians themselves.

WTO compliant

The tariff must not violate the rules of the World Trade Organization (WTO) or the free trade agreements signed by the 27 with third parties. In addition, it must be in line with existing mechanisms in the EU to internalize the cost of global warming in the COMMUNITY economy, such as the _CO2 rights market or carbon taxes applied by several partners.

The Commission indicates that it is considering a number of options when designing it, from a customs levy to the extension of the _{CO2 duty} market to imports. To calculate its magnitude, it studies using the methodology used in this market or assigning a carbon footprint to the different products, taking into account their relationship with current and future climate policies. And it proposes to apply it in the sectors with the highest risk of carbon leakage.

On the other hand, to apply it will be necessary for importers and authorities to be able to determine the _CO2 emissions associated with the production of goods, so that it will be necessary to implement controls, and audits in third countries.

To reduce the bureaucracy of the procedures and avoid the administrative barriers that all this can cause, it recommends taking advantage of the methodologies for calculating _CO2 emissions already in place. Currently, the WTO is already working on the design of international standards to introduce the cost of _CO2 into cross-border trade.

Weighing the social cost

In addition, the Consultation points out the importance of taking into account the impact of the tariff, such as the protection of employment and European industry, but also the increase in the price of many imported products, some of them of basic necessity, obviously with greater effect on the poorest population.

It will also have to take into account its impact on third countries, which will receive a strong incentive to produce in a more sustainable way in order to access the European market.

All these aspects are being included in a large study that is already underway, which will take into account the information gathered thanks to the public consultation, and which should be ready next year.

Source: The Economist