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Europe Concerned About Carbon Tariffs Triggering Green Trade War

European nations are wary about a perceived trend in France and the United States to use international competition as a reason to back off on carbon-reduction pledges.

They are concerned that carbon tariffs could be used to fend off competition from countries which have not committed to reducing emissions, in effect triggering a green trade war.

So far, France has been the only European Union member state to openly rally for the introduction of border measures to secure the competitiveness of European industry against emerging economies. It put the measure on the table in 2008 when the EU was immersed in discussions on a revision of its emissions trading scheme (EU ETS).

Since agreement was reached on the EU revised directive in December 2008, carbon tariffs largely disappeared from debates until the US floated the idea in a draft climate bill. In the EU, meanwhile, France is having difficulty finding allies to rally around the cause.

As EU environment ministers met informally last week to discuss Europe’s position for international negotiations, the Swedish EU Presidency warned that hints of protective measures would block progress towards a global deal, which it said was already too slow.

The EU is dealing with the competitiveness issue differently. It is granting free emissions “permits” to industries which might be tempted to relocate to areas with less stringent regulations, an effect dubbed ‘carbon leakage’.

In a measure opposed by President Obama, the US House of Representatives inserted a provision in its draft climate bill that allows the US to impose a ‘border adjustment’ after 2020 on certain products from countries which do not limit their global warming emissions. The move was seen as a pre-emptive measure to tackle American firms’ loss of competitiveness in the face of cheaper products flooding from countries without a carbon premium.

Obama has said: “At a time when the economy worldwide is still deep in recession and we’ve seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals”.

Rajendra Pachauri, chair of the UN’s Intergovernmental Panel on Climate Change (IPCC), also criticised the draft legislation, warning that it would allow developing countries to tax US exports in return.

This article originally appeared on ENN, the Environmental News Network.

[photo credit: Flickr]