Revenues from the European Union’s upcoming carbon border charge will be “recycled” to replenish the EU budget and finance the bloc’s green transition, senior officials have said.
However, this won’t be the main goal, they cautioned, saying the new levy must pursue environmental objectives to comply with WTO rules.
The European Commission’s proposal for a “carbon border adjustment mechanism” will be tabled in June, as part of a wider package of laws aimed at cutting the EU’s emissions by 55% below 1990 levels before the end of the decade.
“It’s a matter of survival for our industry,” said Commission climate chief Frans Timmermans during an online debate last week, adding that Europe will impose the levy on non-EU competitors unless they commit to lowering their emissions.
Timmermans said the goal is to avoid the risk of “carbon leakage,” whereby companies relocate manufacturing abroad to countries where pollution costs are lower.
Although there is little evidence of carbon leakage to date, “the risk is real,” said Mauro Petriccione, director general at the Commission’s climate action department.
“And as we strengthen our climate ambition, that risk grows,” the official told an online event organised on 14 January by AFEP, the French association of large companies.
The European Union’s proposed carbon border charge is essential to the survival of its own industries and the bloc will impose the levy on non-EU competitors unless they commit to lowering their emissions, the bloc’s climate policy chief said on Monday (18 January).
Patrick Pouyanné, CEO of French oil and gas major Total, said putting a carbon price on imported goods was “a very logical extension of the EU’s carbon price policy” and a necessary step to ensure a level playing field between EU industries and foreign competitors.
“It could be a protective instrument but also a proactive instrument in terms of reducing carbon emissions in other parts of the world,” he told participants at the event.
The stakes are high for Europe’s industry. According to a study by AFEP, the price of CO2 allowances on the EU carbon market are set to reach stratospheric levels in Europe as the EU tightens its climate goals, from around €30 per tonne of CO2 today, to around €40/t by 2030 and above €230/t by 2050.
Without a carbon border adjustment mechanism, EU industries would be beaten by foreign competitors in countries that do not have a similar carbon cost, Pouyanné argued.
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January 25, 2021 at 08:15AM