EU LEADERS HEDGE ON IMPORT TARIFF

In the process of developing a wide-ranging set of rules for the next phase of the EU’s climate change-fighting, emissions-reduction program (see THE EU PRESENTS: THE FUTURE OF EMISSIONS REDUCTIONS), the EU has confronted the controversial question of how to charge its business and industrial sectors for the emissions they generate without putting them at a ruinous disadvantage to their competitors in nations where there is no such cost.

The U.S., Japan and the EU have practiced a sort of “emissions rendition” by importing goods from China, India and Eastern Europe, where the “dirty work” (emissions-intensive manufacturing) is done at low cost. That works out fine for U.S., Japanese and EU consumers but defeats the emissions reduction purpose and penalizes their business and industrial sectors.

One solution is a tariff on imported goods manufactured without an emissions cost. Uncertain what the economic impact of such a tariff would be, EU ministers are hedging. (See EU BACKS CARBON IMPORT TARIFF)

Interestingly, they are hedging in a particularly European way. Unnamed EU diplomat: “The ministers’ statement can be read in two different ways, and no doubt it will be read in those ways by the two different audiences…”

The EU will reach a decision and make a choice. The rest of the world will learn from that choice. Only EU citizens will pay the price for the lesson. In return, however, EU citizens will get the first post-carbon society.

What else do you call it when you send your dirty work elsewhere? (click to enlarge)

EU ministers wary of carbon tariffs
Tony Barber, February 12, 2008 (Financial Times)

WHO
EU finance ministers; Joaquín Almunia, EU monetary affairs commissioner; unnamed EU diplomat; Nicolas Sarkozy, President, France; Peter Mandelson, EU trade commissioner

WHAT
Ministers are split on the question of an import tariff as a means to protect EU manufacturers and induce nonparticipating nations to join in an emissions-reduction trading scheme.

Western nations import big from serious greenhouse gas emitting nations. (click to enlarge)

WHEN
- The rules being debated apply to Phase 3 of the EU program, beginnng in 2013.
- EU leaders have expressed the intention to reach a decision by 2009.
- Many hope the decision will be made easier by agreements reached at the December 2009 climate change summit.

WHERE
- On the question of the tariff, there is a French camp and a British camp.
- The December 2009 climate change summit will be in Copenhagen.

The emissions cause climate change here, there and everywhere. (click to enlarge)

WHY
- On the commitment to the EU’s triple 20 – cutting emissions 20%, improving efficiency 20% and getting 20% of power from New Energy by 2020 – there is widespread agreement.
- There is almost unanimous consent to the idea that on climate change, the cost of inaction is much greater than the cost of any action.
- The French camp’s concern, expressed by Sarkozy, is protecting EU industry.
- The British camp, for whom Mandelson speaks, fears irrational protectionist extremes.

QUOTES
- Almunia, EU monetary affairs commissioner: “It’s better to fight climate change than to suffer the consequences of climate change…
- EU finance ministers joint statement: “Existing evidence suggests that risks will be concentrated in energy sectors and energy-intensive sectors of the EU economy, which vary across member states…”