A New Tax on Greenhouse Gases
Newsletter In a first, the European Union is imposing a charge on some high-emissions imports like steel. Heres what it means. The European Union has approved the worlds first carbon tax on imports. Its designed to make certain products a lot more expensive if they come from manufacturers that arent paying for their greenhouse gas emissions. It didnt get a lot of attention, but its a big deal because these kinds of tariffs could be very effective in reducing the industrial carbon dioxide emissions that are heating the planet to dangerous levels. Its a potentially powerful incentive for countries to curb emissions. But its also a risky move in some ways because it could disrupt global trade and have an outsize effect on poorer countries. Here are a few key things to know. The stated goal of these tariffs is to . Imagine that European steel manufacturers are paying a fee for their carbon dioxide emissions and their competitors outside the E.U. arent. That would put the European countries at a disadvantage on price. It could, in theory, also push European companies to relocate their operations to countries where carbon isnt taxed. Thats what specialists call carbon leakage, the idea that emissions can just move elsewhere when restrictions are imposed. To avoid that, Europe is going to apply the carbon border tax, formally known as a carbon border adjustment mechanism, on foreign competitors that arent paying as much, or anything at all, for their emissions. The new tax will be imposed on seven high-emissions sectors, including steel and cement, starting in 2026. The European law, which was formally approved last week, has reignited conversations about carbon border taxes in other countries. Senator Sheldon Whitehouse, a Rhode Island Democrat, told me in an email that he plans to present a new proposal for a similar tax in the United States in the coming months. Im optimistic theres a pathway to getting a bipartisan carbon border adjustment through the Senate, Whitehouse wrote. We can deliver a boost to cleaner American manufacturers that are competing against high-polluting counterparts in China, India and elsewhere. Imposing taxes on emissions could cost jobs in the developing world, where the expensive proposition of decarbonizing economies is especially complicated. Lets take India, a country that relies heavily on coal for energy, as an example. According to calculations from , Indian steel could get taxed at 15 percent under the new European rules, which could cause Indian steel exports to Europe to fall by 58 percent. That could be a big problem for India, where the steel industry indirectly employs . Major emerging economies, like Brazil and India, as well as smaller ones, such as Thailand and Cameroon, were not happy about the European move. Some countries say its a thinly disguised way for the Europeans to protect their companies from international competition under the guise of climate policy. (Sound familiar? Thats exactly the kind of from some foreign countries.) Perhaps more important, critics of the new European tax say the countries that have contributed the least to climate change shouldnt have to pay as much as the industrialized countries that caused the problem. They point to a principle and other environmental agreements. It says that, while the overall responsibility to stop environmental destruction and climate change is common to all countries, each has different levels of responsibility according to its own circumstances. Its a principle that hasnt had much impact when it comes to international trade. Varun Agarwal, an expert in climate policy at the World Resources Institute in India, told me he believed it would be unlikely for the law to fall under a challenge in the World Trade Organization. At the moment, there is no principle of equity enshrined within trade policy, he said. Still, the success of Europes carbon border tax may depend on how these disagreements play out, according to Rishikesh Ram Bhandary, a climate finance expert at Boston Universitys Global Development Policy Center. The policy may help appease opponents of climate action in certain countries, he said, by assuring critics that the competitiveness of local companies wont be harmed. But by fueling mistrust between countries when it comes to climate policy, he added, it could also unwittingly have the exact opposite impact of simply increasing polarization. The president announced his re-election bid today, but its not at all clear that young climate voters who helped him win in 2020 will . The E.P.A. is expected to announce limits on greenhouse gases from power plants. The rules could require them to . A new study by researchers in Britain identifies places that might . 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Despite that success, a labor shortage now threatens the health of the woodland that is . Claire ONeill, Chris Plourde and Douglas Alteen contributed to Climate Forward. Read . If youre enjoying what youre reading, please consider recommending it to others. They can . Browse all of our . Reach us at . We read every message, and reply to many! is a writer for the Climate Forward newsletter, currently based in Brazil. She was previously a fellow at the Rainforest Investigations Network, where she examined the forces that drive deforestation in the Amazon.