Carbon Tariffs won’t protect the climate

We have still 40 days left, until the international climate negotiations are going to start in Copenhagen. This limited time frame should be used to find solutions how to streamline the negotiation text from its present 150 pages to an acceptable, but still ambitious minimum. While most actors in Europe are concentrating on finding solutions to this huge challenge, others are already planning a failure and concentrate on alternative strategies. One issue constantly mentioned among those pessimists, is the introduction of ‘carbon tariffs’. Since the implementation of the EU emission trading scheme in 2005, companies are obliged to hand in certificates for every ton of CO2 they release in the atmosphere. Consequently, this leads to rising costs for the production of those goods with a comparatively high emission performance. This becomes problematic in cases, in which European companies are in competition with companies from regions in other parts of the world, where there is no such thing as emission trading or environmental protection at all. Due to the recognition of this unfair situation, European Council and European Parliament decided (during their debates on the Energy-and-Climate-Package at the end of last year) that a majority of emission allowances will be handed out for free to those companies, affected by international competition. This decision will be reviewed depending on the outcome of the Copenhagen summit. If we accomplish to get an international agreement, the EU will decide on a more ambitious reduction quota and less free allocation of allowances. If we get no agreement with other industrialized countries, free allocation of certificates for companies will remain at a high rate in order to prevent unfair competition. This means that the EU is prepared for protecting companies from an uneven playing field by giving them an exceptional position in the EU emission trading scheme.
What is now behind the idea of introducing carbon tariffs or border adjustments? Representatives of some leading industrial branches in the EU, supported by French President Nicolas Sarkozy, argue that additional measures should be implemented, in order to protect European companies from growing competition pressure. From their point of view, free allocation of allowances to EU companies should be accompanied by additional taxation of companies and goods from countries that have not introduced similar climate protection measures so far; even if this protectionist argument is destructive to Europe’s leadership role in international climate negotiations and at least questionable with regard to the principle of reciprocity.
But despite those rather general remarks, there are also other arguments preventing us from introducing those measures at the moment. If the EU started taxing goods and products from developing countries for environmental reasons, governments in China or India would start introducing similar measures for reasons of unequal wealth or late industrialization that would affect the European economy in a similar negative way. This helix would seriously challenge the little steps of success, which we reached in the last couple of years in WTO negotiations. At the same time, there are environmental arguments that should prevent us from following this track. How do we treat companies which decided on purpose to produce ecologically sustainable goods? Are we going to punish them by imposing carbon taxes? After recognizing that we do not have the administrative capacities to control the carbon footprint of every single company in the world selling goods and products in the EU, there would be no other possibility. No, climate tariffs are not the solution to environmental challenges in a globalized world.
After all, this discussion is heating up at a point in time, when we should be focused on completely different issues. The Copenhagen negotiations are coming closer every day and we are still struggling to give basic answers to the most pressing questions: How do we protect forests and how do we attach a higher value to biodiversity? How do we interconnect our emission trading scheme with similar systems to be established in other countries soon? What can we offer with regard to financing mitigation and adaptation measures in developing and emerging economies? How can we assist those people, already affected by the negative impacts of a warming planet?
It is no secret that our partners all around the world are following the discussions in the EU with interest. Neither China, nor India or Russia will accept climate policy as a new argument for protectionism. At the same time, the US is in a critical phase of introducing climate legislation.  Protectionist behavior will only provide support to those people, who use every possibility to present all the negative effects of introducing environmental legislation. Our message should be a different one: The EU is going to Copenhagen in order to concentrate on common goals for protecting our planet from irreversible damage. Only by acting together and not against each other, we will have a chance to be successful in the end.

Jo Leinen is Chairman of the Environment Committee in the European Parliament and Head of the Parliament’s Delegation to Copenhagen.