German newspaper WELT reports on the planned green house gas tariffs on goods from non-EU-member states:
Climate protection is currently well received by voters; At the geopolitical level, however, ambitious climate policy doesn't just make friends. This applies above all to the currently discussed climate tariff for products that are produced in countries with less stringent climate regulations than Europe.
The so-called CO2 border adjustment is intended to make imported products that are more harmful to the climate overseas than in Europe more expensive at the borders of the EU. The climate protection wall around the continent could thus ensure that European producers, with their higher energy costs, can remain competitive on their home market. Stricter climate rules and rising energy prices should be possible without endangering jobs, for example in the energy-intensive steel industry.
Commission President Ursula von der Leyen, who had already promised the border adjustment before taking office, wants to present the specific plans in mid-July as part of her large Fit for 55 climate package. WELT has a first unpublished draft of the legal text. Formatting, placeholders and notes clearly show that this is an early design stage, and many details are likely to be added and changed by mid-July.
The main features of the regulation can already be read from the paper. For example, the Commission, which is writing the legal text on behalf of the member states, initially only wants to levy the border adjustment on a few particularly energy-intensive raw materials that are imported into the EU. They are listed in an appendix to the actual document: steel, cement, aluminum, electricity and fertilizers.
This selection also makes it clear who the border adjustment, which is only abbreviated to CBAM in Brussels, will primarily affect: Russia and Turkey and, to a lesser extent, China. "Russia and Turkey are the countries that will initially be hardest hit by CBAM," says Simone Tagliapietra, Senior Fellow at the Brussels think tank Bruegel. "No other country outside the EU comes to Europe as much steel as Russia, and Turkey is by far the largest cement supplier outside the EU."
Russia is also the largest supplier of aluminum from outside the EU, along with China and Norway. Imports from Norway, however, should be excluded from CBAM, as well as those from Switzerland, Liechtenstein and Iceland, which together form the European Free Trade Association EFTA.
The management consultancy Deloitte has calculated that Russia would be most severely affected by the border adjustment before all other trading partners. Russia delivered steel, aluminum, electricity and cement worth more than nine billion euros to the EU in 2019. This is followed by China with imports of more than six billion euros and Turkey with imports of a good five billion euros.
What makes the situation particularly delicate for Moscow and Ankara is that they do not levy any national CO2 taxes themselves. The Commission wants to link the amount of the new levy to the prices for CO2 pollution certificates in the EU, which have risen steeply recently.
When calculating the tax at EU borders, however, it should be taken into account whether the trading partners have CO2 pricing in their own country, for example through trading in pollution certificates as in the EU.
Russia and Turkey are actually the only countries in the G20 group that do not have a national emissions trading system and do not charge a price on CO2. China, on the other hand, started its own national emissions trading system in February. It is initially limited to a manageable 2200 companies, but is to be expanded.
In Moscow, unrest is apparently also spreading. The Russian Ministry of Natural Resources is already estimating how much the new levy could cost Russian companies. The Russian government meanwhile wedges against the planned border adjustment and has made it very clear that it will contest the regulation before the World Trade Organization (WTO).
In fact, it is crucial that the rules do not violate WTO rules; otherwise trading partners who feel they have been treated unfairly by the rules could impose punitive tariffs. The Commission Vice-President Valdis Dombrovksis, who is responsible for trade issues, never tires of emphasizing that it is crucial for the authority that the border adjustment is WTO-compliant. The WTO only allows foreign products to be disadvantaged compared to domestic products in exceptional cases.
Nevertheless, there are doubts, even after the draft of the legal text that has become known: "The key question of compatibility with WTO rules remains unanswered," says Katja Leikert, the deputy chairman of the CDU / CSU parliamentary group responsible for European policy. "In times when we as Europeans want to strengthen the WTO as a whole, a de facto protectionist measure would be the wrong sign."
A decisive factor for this assessment will also be whether the border adjustment supplements or completely replaces existing climate aid for European industry. Up to now, the particularly energy-intensive companies obliged to participate in emissions trading have received some certificates free of charge.
However, the amount of this allocation decreases from year to year. The industries concerned would like to have both: the free certificates and, in addition, the border adjustment for foreign competition. But such double subsidization could make it even more difficult to justify the new instrument before the WTO.
The list of affected trading partners will also grow if the list of products recorded by CBAM becomes longer - possibly even before the presentation of the legal text in mid-July. So far, the list has been limited to a few, albeit energy-intensive, selected raw materials. This means that it only covers a very small part of all EU imports.
However, the amount of this allocation decreases from year to year. The industries concerned would like to have both: the free certificates and, in addition, the border adjustment for foreign competition. But such double subsidization could make it even more difficult to justify the new instrument before the WTO.
The list of affected trading partners will also grow if the list of products recorded by CBAM becomes longer - possibly even before the presentation of the legal text in mid-July. So far, the list has been limited to a few, albeit energy-intensive, selected raw materials. This means that it only covers a very small part of all EU imports.
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