EU ministers in charge of competitiveness are meeting in Brussels today (1 March) to adopt conclusions on a "new industrial policy".
"The discussion is expected to concentrate on key objectives for establishing the principles that should be included into a fresh and integrated approach to keep EU industry competitive," reads a background statement prepared by the Spanish EU Presidency ahead of the meeting.
In the aftermath of the UN climate conference in Copenhagen, EU ministers will debate ways of protecting industrial competitiveness from the risk of 'carbon leakage', meaning the relocation of factories, jobs and carbon dioxide emissions to countries with less stringent environment laws.
"We are underlining that carbon leakage is a major problem for industry," said a diplomat from a large EU member state. "Above all, this is a major problem for the climate. And so we are repeating what we have said permanently - we have to protect ourselves from carbon leakage."
A pet project of French President Nicolas Sarkozy, border tariffs aimed at restoring fair competition between European industries and major polluters such as China have gained little support from other EU leaders, with the exception of Germany's Angela Merkel.
Franco-German letter ahead of Copenhagen
Ahead of the Copenhagen climate conference in December, Merkel and Sarkozy wrote a joint letter to UN Secretary General Ban Ki-Moon calling for the possible introduction of "appropriate adjustment measures" against countries that do not make sufficient commitments on climate change (EurActiv 18/09/09).
But Karel de Gucht, the EU's new trade commissioner, rejected the idea during a hearing in the European Parliament in January, saying it "will run into many practical problems" and risk triggering a trade war (EurActiv 13/01/10).
Meanwhile, "it has become a bit of a controversial issue because it was France that proposed it and because it has been named a carbon tax at the border," said the diplomat, who did not wish to be named.
But he said that the way of thinking is evolving among France's EU partners, who are no longer talking of carbon tariffs but a "carbon inclusion mechanism" that integrates the CO2 cost of products imported into the EU.
Poland, the diplomat continued, has rallied behind the French position and countries like Belgium and Italy are also starting to change their views.
"We are saying explicitly in the text that the implementation of [EU climate change laws] should aim for two things: tackling climate change on the one hand and improving competitiveness on the other," he says, adding this represented "an evolution" from previous positions.
Draft conclusions from the ministerial meeting indeed state that "appropriate measures" can be considered to tackle carbon leakage if they are compatible with international trade rules. But it makes no specific mention of carbon tariffs or a "carbon inclusion mechanism" at this stage.
Angela Merkel, who supported Sarkozy's calls for a level playing field for European industry in the face of Chinese competition, has not made up her mind yet on the specific issue of carbon tariffs, according to German sources in Brussels.
"We do see the problem as well," said an EU diplomat, pointing out that this is "quite a sensitive issue in Germany," which has the largest industrial base in Europe.
But he stressed that WTO compatibility was "very important" to Germany as manufacturers there had the most to lose from a trade war.