The European Parliament asks to tax some imports to advance climate objectives

In order to raise global climate ambition and prevent so-called ‘carbon leakage’, the EU should tax some imports from less demanding countries in this area.

On Wednesday, the plenary adopted, with 444 votes in favour, 70 against and 181 abstentions, a resolution on the establishment of a border adjustment mechanism for carbon emissions compatible with WTO rules.

The text underlines that the EU’s growing ambition in the fight against climate change should not lead to so-called ‘carbon leakage’, as the effort will not pay off if EU production is simply moved to other countries with less stringent rules for greenhouse gas emissions.

MEPs propose to set a price for the import of certain products if they come from countries whose environmental objectives are not ambitious enough. This would create fairer conditions of competition and incentivize all countries to intensify their efforts to achieve the goals of the Paris agreement.

Parliament stressed that any mechanism should be compatible with WTO rules and not be used as a tool to increase protectionism. It must therefore be designed exclusively to drive the achievement of climate objectives. The revenue generated should go to the Union budget and be dedicated to climate action and the objectives of the Green Deal.

Emissions Trading System (ETS) Mechanism

Parliament wants the carbon border adjustment mechanism to be part of a broader industrial strategy and to cover all imports of products and raw materials covered by the emissions trading system. As a starting point (by 2023), and following an impact assessment, it should include the electricity sector and energy-intensive industrial sectors such as cement, steel, aluminium, petroleum refining, paper, glass, chemicals and fertilisers, which continue to receive significant free allowances and still account for 94 % of the Union’s industrial emissions.

MEPs believe that linking the carbon price in the new mechanism to that of emission allowances will help combat “carbon leakage”, but warn that the implementation of the new system should not lead to EU installations enjoying double protection.

You can watch the debate in plenary again.

Declaration

Following the vote, rapporteur Yannick Jadot (Greens/EFA, France) said: “We have the opportunity to reconcile issues related to climate, industry, employment, resilience, sovereignty and offshoring. Let us not be innocent and ensure that all products are taxed equally for their use of carbon, whether or not they are manufactured in the EU, to ensure that the most polluting sectors contribute to the fight against climate change and innovate to move towards decarbonisation. This mechanism will help us stay below the 1.5° warming threshold while incentivising other countries to be just as ambitious if they want to access our market.”

Next steps

The Commission plans to present a legislative proposal to establish a border carbon adjustment mechanism in the second half of 2021 as part of the European Green Deal, accompanied by another initiative on how to include the revenue generated in the EU budget.

Parliament has played a key role in raising the EU’s ambition in this area. In November 2019 the House declared a climate emergency.

Source: European Parliament