SJ Salomon International - EU Proposes Carbon Border Tax

Tokyo, Japan, July 01, 2021 --(PR.com)-- The European Commission is set to propose a carbon border tax. Making it the first country to penalise exporters for the carbon emissions embedded in products - a step toward fighting climate change, protecting domestic producers and gaining an edge on international competitors in countries with softer climate policies.

The new tax regime will impose a carbon emission levy on the import of steel, aluminium, power and cement, as a means of economic dominance to set Europe up as the first climate neutral continent. Importation would necessitate the purchase of digital certificates, equitable to a tonne of carbon emissions resulting from the production of the specified import products. The cost of which will be in correlation to the cost EU carbon permits, which have reached level highs – trading at 52 euros/CO2 tonne. However, countries exhibiting similar environmental standards may be exempt from the border fee.

The 4 BASIC countries: Brazil, South Africa, India and China, have argued that the plan negates the UN principle of “common differentiated responsibilities” which speaks to the fact that developing nations are evolving at different paces and capacities. Analysts at SJ Salomon International have disputed the premise of the EU solely combating climate change, citing it to be a facade for protectionism that will only work to dismantle the emerging economies. Those worse off than Europe. Developing nations would shoulder the impact - in an age when the economic depression imposed by COVID-19 already has these countries in a chokehold.

SJ Salomon International analysts believe solace is to be found in the lack of support from the industry which may hinder political negotiations surrounding the plan. The trade off between the loss of free allocation for European producers and the protection offered by the carbon emission levy may not be warranted or compatible with the standards set by the World Trade Organization and is more than likely to be disputed by energy intensive industries.