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25/09/2016

Sarkozy renews pressure for CO2 border tax

Climate & Environment

Sarkozy renews pressure for CO2 border tax

Sarkozy_01.jpg

French President Nicolas Sarkozy repeated calls to impose a European tax on goods imported from countries with less stringent environmental laws as he outlined plans for a new carbon tax on French households and industries last week (10 September).

In a speech, Sarkozy said he would put his weight behind convincing his European colleagues that the EU needs a carbon tax at its borders to safeguard the competitiveness of its industry.

“I’m in favour of environmental protection but I want to keep our industry,” he said.

The president said that he would not accept a system where European countries impose constraints on their industries for climate protection while allowing imports to continue from countries that do not respect the same rules.

“I will lead that battle,” he said.

Sarkozy has repeatedly called for such a border adjustment mechanism since negotiations over the EU’s climate and energy package, agreed last December.

Uphill battle for Sarkozy

But Sarkozy will have a hard time convincing the 27-member bloc that border tariffs are the way to fend off unfair competition resulting from the EU’s progressive climate policies. Sweden, which currently holds the EU’s six-month rotating presidency, has warned that protective measures would block any progress towards a new global climate treaty in Copenhagen in December (EurActiv 28/07/09).

European Commission President José Manuel Barroso echoed these warnings on 4 September. “I think it’s premature to discuss this at European level because our aim now is to convince others – the Americans, but also the Chinese – to join us in similar types of measures,” he said in an interview with RTL radio.

The former Portuguese prime minister pointed out that as the world’s biggest exporter by far, it was not in Europe’s interest to erect protectionist walls.

But Sarkozy claims his call is not about protectionism but fair competition. He said he was encouraged by the US, where the House of Representatives included a provision for a border carbon tariff in its draft climate bill. 

Moreover, he pointed to a WTO report which said that a carbon tax at the EU’s borders would be allowed under international trade rules if member states put in place national carbon tax plans.

Sarkozy’s green tax plan

Sarkozy said border carbon tariffs would complement the French carbon tax well. Despite much political controversy, the president is pushing forward with his plan to levy a new tax on oil, gas and coal consumption by households and businesses. 

The president announced that the tax would be set at €17 per tonne of carbon emissions from next year, rising gradually. The new tax would add 4.5 cents to the price of a litre of diesel, four cents to a litre of petrol and around 0.4 cents to a KWh of gas.

Sarkozy stressed, however, that the idea was not to make money for the state coffers, but to give people an incentive to participate in the fight against climate change by transforming their wasteful ways.

He promised that consumers’ cash would be returned to them through cuts in income tax and “green” cheques. Moreover, people living in rural areas with poor public transport connections would be compensated more than city dwellers.  

Environmentalists jumped on the low level of the tax, after initial proposals of €32 per tonne of CO2 were rejected in favour of a figure that better represents the market value of CO2.

Furthermore, the decision to exempt electricity from the scheme was criticised. Sarkozy argued, however, that French electricity is produced mainly in nuclear plants, which have low emissions. He said it would make little sense to tax electricity from renewable sources while encouraging those very same low-carbon energy technologies.

Background

Border carbon tariffs have been floated as a way to prevent European businesses from relocating to third countries as the EU progressively ups its environmental protection laws.

The idea was put forward in January 2008, when the Commission presented its climate and energy package, including a revision of its emissions trading scheme for greenhouse gases (EU ETS) (EurActiv 23/01/08).

But heavy industries, including the cement, steel, aluminium and chemical sectors, argue that a tightened ETS would inflate their costs to such an extent that they would be forced to move their factories and jobs beyond the EU's borders, leading to a 'leakage' of CO2 emissions without any environmental benefits (see EurActiv LinksDossier).

When EU leaders agreed on a revised ETS (see EurActiv LinksDossier) in December last year, they granted sweeping exemptions from the scheme to industries that are subject to competition from countries with less stringent CO2 emission-reduction regimes.

They hope that a new international agreement to replace the Kyoto Protocol would help redress such imbalances.

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