France takes carbon tariff campaign to Washington

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France will seek an agreement with the US on a carbon border tax and is convinced that other EU states will come on board if Washington supports it, according to French Environment Minister Jean-Louis Borloo. EURACTIV France reports.

Borloo told the European affairs commission of the French Parliament on Tuesday (6 April) that he would meet US President Barack Obama to reach an agreement on the controversial measure, which would allow the imposition of taxes on imports from countries with less stringent environmental policies.

A joint measure could be ready in June, he said.

The European Commission's official line is that it does not support border tariffs, amid fears that they could provoke retaliation from major trade partners like China. They could also be deemed illegal under World Trade Organisation (WTO) rules, critics say.

But Borloo said he is "not worried" about securing the support of other member states for the plan, "even if eventually it is better to have a carbon market".

The French minister argued that resistance to the tax has been waning. A clear majority of the 27 EU countries was once opposed to the idea but it is now contested by just four member states, including Denmark and the Netherlands.

Borloo referred to a WTO report often cited by French President Nicolas Sarkozy – who is leading calls for border tariffs – which stated last summer that introducing border tariffs on carbon would not contravene the organisation's rules if they were properly constructed. Three Chinese provinces are already experimenting with such a tax, he said.

France is stepping up its international campaign to safeguard domestic industry from foreign competitors operating without carbon constraints. It expects support from the US, where the draft climate bill passed by the House of Representatives last year includes provisions for a "border adjustment" mechanism.

Commission sceptical

But while European nations seem to be moving behind France's proposals, the European Commission remains highly sceptical.

A Commission working document on innovative climate financing options, published on Tuesday, warned that a carbon border tax has "a considerable number of drawbacks which would need to be addressed".

The tax would have to be compatible with WTO rules, but could lead to trade conflicts and retaliatory measures regardless of design, the paper argued. Moreover, it would come with high administrative costs and require additional rebates to avoid increasing the costs of intermediate goods.  

The document contradicts statements by French President Nicolas Sarkozy at the close of the Spring European summit on 26 March, when he said the Commission would present an initiative on carbon border taxes in June.

In fact, the EU executive will in June present a study assessing the economic impact of raising Europe's emission reduction targets to 30% by 2020, anticipating that the costs would be lower in the wake of the recession. Higher environmental ambitions are bound to give new impetus to border tariff demands.

Carbon border tariffs have been floated as a way of preventing European manufacturing industries from relocating to countries like China, where environmental laws are less exacting.

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

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).

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