Mandelson rejects CO2 border tax 

The EU must continue to take global leadership in the fight against global warming, but imposing punitive measures on countries that are not taking action on climate change is certainly not the answer, Trade Commissioner Peter Mandelson said on 18 December 2006. 

The idea of imposing a “green” tax on imports from countries that are not parties to the Kyoto Protocol, in order to cancel the competitive advantage they gain over the EU from not implementing costly emission-reduction schemes, was aired one month earlier by French Prime Minister Dominique de Villepin at the annual UN conference on climate change. 

Villepin announced that the French Government would "make concrete proposals in that direction in the first quarter of 2007". 

French Prime Minister Dominique de Villepin argued: "Europe has to use all its weight to stand up to environmental dumping,” adding that France would urge its European partners to study “the principle of a carbon tax on the import of industrial products from countries which refuse to commit themselves to the Kyoto protocol after 2012". 

Trade Commissioner Peter Mandelson dismissed Villepin’s plan as “highly problematic under current WTO rules and almost impossible to implement in practice”, pointing to the practical difficulties of choosing which goods to target, when faced with imports from China – which has ratified Kyoto but has no targets because of its developing country status – and the US, which has not ratified the Treaty but in which certain states like California have ambitious climate change policies. 

He also stressed that such a policy would "not be good for politics" and highlighted Europe's "historical environmental debt", having contributed, with the rest of the rich world, to 80% of carbon emissions to date. 

Instead, he called on the EU to take the lead in proposing a WTO-wide deal that would eliminate all tariffs on trade in green technologies and energy-saving equipment, thus fostering their development by making them more easily available to all nations. 

This, he said, would also create opportunities for European industries, which could obtain a clear competitive advantage in this area – compensating for any losses endured from adhering to the Kyoto Protocol. 

"Emissions trading can drive up the cost of emitting greenhouse gases and thus restrain them. Maximising exchange and trade in green technology is what will ultimately drive emissions down altogether," he said. 

In a letter to Commission President José Manuel Barroso, Enterprise and Industry Commissioner Günter Verheugen backed de Villepin's proposal, saying that if Europe remained alone in cutting emissions, there was a risk that companies could shift their production where standards are more lax. He said that "border tax adjustments" for developed countries that have yet to implement the Kyoto treaty could balance out such effects. 

The idea has not received a particularly warm welcome from EU businesses. Climate-change expert Daniel Cloquet at UNICE, the European employers' association, expressed the "highest reserves" over the idea, saying that it holds the potential to launch "a commercial war" with the US or China, which do not have cap-and-trade systems. 

On the other hand, John Hontelez, secretary-general of the European Environment Bureau, a federation of 143 environmental organisations, says that he supports the idea of a border-tax adjustment. "The Commission has picked this up and found it interesting enough to include it in discussions," he said.