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Politics Who is afraid of the EU's carbon border adjustment plan?

10:20  14 october  2021
10:20  14 october  2021 Source:   thehill.com

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Any American who is wary of the EU ’ s proposal should focus on these three realities C-BAM, in a nutshell, would charge importers of steel, aluminum, iron, fertilizer, cement and electricity the equivalent of the EU ’ s domestic carbon price. This adjustment would, according to the plan , prevent the migration of domestic production to polluter havens abroad as the EU ’ s carbon price is set to rise in the years to come.

The Commission’s proposal for a Carbon Border Adjustment Mechanism (CBAM) should prevent the risk of carbon leakage and support the EU ’ s increased ambition on climate mitigation, while ensuring WTO compatibility. The CBAM will equalise the price of carbon between domestic products and imports and ensure It also aims to encourage industry outside the EU and our international partners to take steps in the same direction. Designed in compliance with World Trade Organization (WTO) rules and other international obligations of the EU , the CBAM system will work as follows: EU importers will buy

A specter is haunting the policy elite in Washington. It's the carbon border djustment mechanism, known as C-BAM, created by the European Union's executive to complement the bloc's emission trading scheme (ETS).

a person holding a sign: Who is afraid of the EU's carbon border adjustment plan? © Getty Images Who is afraid of the EU's carbon border adjustment plan?

C-BAM, in a nutshell, would charge importers of steel, aluminum, iron, fertilizer, cement and electricity the equivalent of the EU's domestic carbon price. This adjustment would, according to the plan, prevent the migration of domestic production to polluter havens abroad as the EU's carbon price is set to rise in the years to come. This common-sense approach to climate change has generated worries not only among the governments of notoriously non-abating economies of Russia, Turkey, South Africa and the likes but also, somewhat curiously, the United States.

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The EU ' s proposed carbon border has sparked discussions about ' carbon clubs'. But will move this undermine the multilateral spirit of the Paris Agreement? But let’s take a step back. The carbon club idea has taken hold against the backdrop of the EU advancing its plans for a Carbon Border Adjustment Mechanism (CBAM) – simply put a carbon border levy to ensure imported industrial products face the same carbon price as those covered by the domestic Emissions Trading System (ETS).

It was, after all, the French who led the charge for a revolutionary new levy to be imposed at the EU ' s ports and border crossings to shield Europe 's industries from cheaper imports made in places with laxer environmental rules. As with the original Bastille Day at the beginning of the French revolution EU leaders called for the levy as part of a package of new EU revenues that should pay back the bloc's debt-fuelled, post-coronavirus recovery package. But by raising €2.6 billion in 2030, according to the draft, "the contribution of [a carbon border levy] to paying back the recovery fund will be rather limited

Critics contend the C-BAM would put U.S. manufacturers at a competitive disadvantage relative to EU producers while the U.S. is still developing its climate and trade policies. What's more, the EU's legislative proposal has raised fears in Washington that the scheme could be expanded to include more products soon after it takes effect in 2023. Projecting these anxieties, President Biden's special climate envoy John Kerry fired a rhetorical warning shot across the Atlantic in March, noting that a carbon border tax would "have serious implications for economies, and for relationships and trade." Many U.S. policymakers have suggested delaying implementation for at least two years, so the U.S. has time to shape its climate solutions.

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An EU Border Carbon Adjustment Mechanism (CBAM) may bring severe economic consequences to countries without the resources to adapt to a low- carbon paradigm. The EU should therefore consider possible policy risks and involve third-country stakeholders in CBAM policy design; use CBAM revenues to fund decarbonisation in at risk countries; and build emissions reporting requirements around existing international obligations. the design of the policy is currently up for debate. Neither the sectoral scope nor the evaluation of car

According to Bloomberg , the carbon border adjustment mechanism will likely function similarly to the EU Emissions Trading System, the world’ s biggest carbon market. In such a system, importers of emissions-intensive goods pay a charge linked to what they would’ve had to pay if they’d been The commission plans to unveil draft regulations in June, but the mechanism will have to be approved by the European Parliament and by member states, a process which could take as long as two years. This means that the mechanism realistically won’t take effect until 2023. One of the biggest sticking points

A leak of the EU's draft proposal in June added to U.S. trade irritations. The document said that importers to the EU could credit carbon tax or EU-style cap-and-trade carbon costs paid in the country of origin but made no mention of the possibility of crediting (U.S.) businesses' "implicit" carbon costs, such as adaptation to environmental regulations.

In one of the more moderate reactions to the plan's details, U.S. Treasury Secretary Janet Yellen supported C-BAMs in general but stressed that such mechanisms should credit indirect carbon costs, too. Other American commentators were quick to conclude that the Europeans aimed to "punish the U.S." and were trying to force her hand to adopt a carbon taxation policy. To counter the perceived threat, Sen. Chris Coons (D-Del.) and Rep.Scott Peters (D-Calif.) introduced bills that would impose an "import polluter fee." The legislation would exempt imports from less-developed nations and from countries whose climate regulations are at least as stringent as those of the U.S. and that do not impose a border carbon tax on American products.

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What does the EU ’ s carbon tariff proposal mean for Australia? A factory worker pours molten iron at a factory in Geelong. Exports to Europe of cement, iron and steel, aluminium, fertiliser and electricity will face potential costs under a new EU climate plan , which Australia’s trade minister Dan Its chief executive, Innes Willox, said the “the carbon tariff genie is out of the bottle” and “not engaging isn’t the answer”, especially once other countries such as the US started to consider carbon border costs. Willox said the organisation’s initial analysis suggested Australia’s exports – some steel and a small

S. whereas the EU ’ s increased ambition on climate change should not lead to the risk of carbon leakage for European industries; General remarks. 1. Is deeply concerned that currently none of the NDCs submitted, including those of the EU and its Member States, are in line with the resources and energy, in support of the Sustainable Product Policy Framework and the new Circular Economy Action Plan ; 12. Considers that in order to prevent possible distortions in the internal market and along the value chain, a CBAM should cover all imports of products and commodities covered by the EU ETS

Such responses reflect misconceptions of a C-BAM's anticipated operation and projected impacts on U.S. and other countries' exports. In fact, the scheme could help the U.S. achieve its climate objectives and benefit U.S. industry at the same time. Accordingly, the proposal deserves support from the U.S., which should see it as a sincere invitation to cooperate on alignment of transatlantic carbon border adjustment policies - after the U.S. has adopted a carbon tax, that is.


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Any American who is wary of the EU's proposal should focus on three realities:

1) The C-BAM is laser-focused on actual greenhouse gases (GHG) emitted in the production process, and U.S. producers are highly carbon competitive internationally.

2) U.S. industry will gain a competitive edge from C-BAM vis-à-vis major exporters of steel, iron, aluminum and fertilizer to the EU, such as Russia, Turkey and Ukraine.

These non-abating economies emit, on average, two to four times more GHG per unit than their U.S. counterparts.

3) The EU has decided not to open the Pandora's box of calculating the price equivalents of regulations. That process would be riddled with mind-blowing methodological difficulties and would set imprecise incentives.

In the midst of Capitol Hill's struggle to fashion climate policies that will meet the steep challenge facing our planet, the EU's C-BAM proposal is an opportunity rather than a threat and a cause for retaliation.

David Kleimann, Ph.D., is a senior visiting research fellow at Georgetown University's Institute for International Economic Law (IIEL) and a senior fellow at the Partnership for Responsible Growth.

William C. Eacho was the U.S. ambassador to Austria under the Obama administration and is the co-founder and CEO of the Partnership for Responsible Growth.

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Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what's going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue! © Provided by Washington Examiner DOE Default Image - July 2021 STAKES RAISED: Senate Democrats unveiled plans this morning to pass legislation, without Republican votes, to put the United States on track to meet President Joe Biden’s goal of cutting greenhouse gas emissions in half by 2030.

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