Environment

EU preparing CO2 tax for products from other countries

EU CO2 tax products countries

Photo: Unsplash

Published

July 29, 2020

Country

Comments

0

Share

Published:

July 29, 2020

Country:

Comments:

0

Share

The European Commission launched public consultations on taxation rules that would help its climate agenda. It expressed the intention to revise the internal Energy Tax Directive and to introduce a carbon border adjustment mechanism in line with the European Green Deal. The latter, effectively a CO2 tax, could be applied for imported and domestic goods or as an extension of the EU Emissions Trading System to shipments from abroad. Some of the Western Balkan countries could be particularly affected.

The investment plan for Europe’s recovery from the COVID-19 pandemic and its devastation of the economy must soon get financing tools and the European Council already proposed a carbon border adjustment mechanism or CBAM. The European Commission has immediately opened public consultations, saying it would introduce a charge on products that are not in line with its emissions policy. It spells trouble for countries outside the EU that lean on obsolete technology and especially fossil fuels, as a CO2 border tax would impact their competitiveness in the 27-member bloc.

The administration in Brussels is also looking to change its Energy Tax Directive. It said minimum rates for fuels and tax exemptions are being reexamined to encourage domestic consumers and businesses to behave in a more environmentally friendly way.

Other trading partners, like Western Balkan countries, would be affected with the carbon adjustment. The biggest impact would be on the industries and states that still rely on coal and the thermal power plants that use it as fuel.

CO2 tax is answer to carbon leakage risk

The CO2 tax initiative was in the pipeline even before the coronavirus crisis as EU authorities were considering ways to offset the expenses for climate policy measures in the domestic economy. The idea is to burden import products with levies according to their carbon content and compliance with environmental rules.

The EU is safeguarding its green objectives by preventing production from relocating to countries with less ambitious climate policies

It would ensure that the EU’s green objectives are not undermined by production relocating to countries with less ambitious climate policies, the European Commission said and pointed to risk of “carbon leakage” for certain sectors.

Various options could include a carbon tax on selected, both imported and domestic products, a new carbon customs duty or tax on imports, or the extension of the EU Emissions Trading System to imports, according to the announcement. The commission said comments can be sent by October 14 for the Energy Tax Directive and by October 28 for CBAM.

EU learning from experiences in California, Quebec

“Europe’s efforts to go climate-neutral by 2050 could be undermined by lack of ambition by our international partners. This would mean a risk of carbon leakage. This occurs when companies transfer production to countries that are less strict about emissions. In such case global emissions would not be reduced,” the European Commission added.

The measure would need to be designed to comply with World Trade Organization rules and other international obligations of the EU, the announcement reveals and points out the need to analyze data on carbon border adjustment mechanisms in place in California and Quebec.

Social impact

European Commissioner for the Economy Paolo Gentiloni said taxation to deliver on the EU’s climate goals must be used “in a socially just way.” The effects of the proposal on member states and third-country markets have to be analyzed for “likely social impacts,” the decision makers warned.

Gentiloni: EU must implement CO2 and energy taxation in a socially just way

“A carbon border adjustment may increase the price of consumer products including those related to basic needs. Therefore, the analysis will need to consider the potential impact on living standards, especially those of vulnerable groups,” the EU’s executive arm stressed.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment
Please wait... Please fill in the required fields. There seems to be an error, please refresh the page and try again. Your comment has been sent.

Related Articles

unpaid-electricty-bills-kosovo-kostt

Kosovo* allocates EUR 40 million to cover unpaid electricity bills in northern municipalities

11 August 2022 - Residents of the four Serb-majority municipalities in the north of Kosovo* have not been paying electricity bills for over two decades

SEEPEX chief Power prices Southeastern Europe EUR 500 MWh fourth quarter

SEEPEX chief: Power prices in Southeastern Europe reach EUR 500 per MWh for Q4 2022

11 August 2022 - Futures for settlement in the fourth quarter indicate an electricity price in Southeastern Europe of EUR 500 per MWh, chief of SEEPEX Miloš Mladenović said

Drought-lowers-hydropower-plant-output-Serbia-Europe

Drought lowers hydropower plant output in Serbia, Europe

10 August 2022 - The water flow in Serbia's hydropower system dropped by a half, increasing the need for electricity imports, but the situation is similar across Europe

Norway power export controls drought hydropower reservoirs

Norway to impose power export controls

09 August 2022 - Norway is preparing a framework for limiting electricity exports at times when the levels of water in hydropower accumulations are low