Europe Proposes a Boundary Carbon Tax. What is it and how will it be


Implementing a carbon cap tax can face several complications.

First, companies hoping to sell certain goods to the European Union will need to monitor and verify the emissions associated with making their products. If countries cannot or do not do this, the EU imposes its own price. Experts say that such verification is possible, but difficult.

Moreover, countries like United States of America, China and Russia all objected to the carbon tax at the border, raising the possibility of retaliatory tariffs and trade wars. Countries can try to challenge the border regulation at the World Trade Organization, although European officials say they are working to ensure the rules are based on legal objections. (Among other things, they call it “regulation”, not “tax” for legal reasons.)

The European Union had previously backed away from similar proposals. A decade ago, European authorities wanted to charge foreign airlines landing and departing from Europe for the carbon pollution they produced. However, the EU shelved this idea. after heavy pressure from the United States and China.

European officials have left open the possibility that they can negotiate individual trade deals with different countries, which eliminates the need for carbon tariffs, especially with countries that are starting to adopt climate policies. But the details would have to be worked on.

Before the EU proposal becomes law, it must be negotiated between 27 member states and the European Parliament. While many EU companies, such as steelmakers, support the idea of ​​limit adjustment, they are less willing about losing their free allowance under the current carbon pricing scheme, as this will force them to make more radical changes to their business. This disagreement can complicate internal negotiations.

Johanna Lehne, Brussels-based senior policy adviser to E3G, a research and advocacy group working on climate policy, said there is still a great deal of debate among experts about how effective the EU’s carbon cap adjustment will ultimately be. But officials said they saw the policy as vital to address fears that the EU’s climate policies could put the continent at an economic disadvantage.

“It sends a real signal that the EU is serious about decarbonizing these industrial sectors,” he said. “And they are trying to find an answer to many of these domestic political concerns.”


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