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Will not hesitate to take measures to protect competitiveness of industries: EU

EU leaders are set to discuss the European Green Deal, a plan that will commit member states to reduce their net greenhouse gas emissions to zero by 2050, on Wednesday. There are concerns that aggressive policies to reduce economy-wide emissions by EU member states could put domestic industry at a disadvantage compared to industries from countries that not undertaking similar policies.

, ET Bureau|
Updated: Dec 11, 2019, 01.58 PM IST
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MADRID: The European Union has said that it will not hesitate to take measures, including a carbon border adjustment tax, to protect the competitiveness of its industries.

EU leaders are set to discuss the European Green Deal, a plan that will commit member states to reduce their net greenhouse gas emissions to zero by 2050, on Wednesday. There are concerns that the aggressive policies to reduce economy-wide emissions by EU member states could put domestic industry at a disadvantage compared to industries from countries that not undertaking similar policies.

Speaking to journalists at the UN Climate talks in the Spanish capital,

European Commission Vice-President Frans Timmermans that most countries barring “very very few” have subscribed to Paris Agreement and agrees it is a good thing and now the “necessity is to translate that into concrete action.” This would require countries to take measures to meet the goals set out in the 2015 agreement. The European Green Deal is the package of measures and policy the European Commission is proposing for the EU to achieve these goals.

Timmermans explained that “if other countries take same or comparable measures there will be no need correct at the border. If countries don’t take measures then at some point we will have to protect our industry that does take the measures. We will not want to put our industry in much weaker position vis-à-vis others that do not take measures.”

The EU leader said, “we will have to account for the difference in the carbon footprint. The carbon footprint should be reflected in the price or we will have to correct for it.”

However, Timmermans expressed hope that the requirement for a carbon border adjustment tax will not arise. “I assume that the world will be moving in the direction of taking steps to achieve the Paris goals and that there will be no need for such a measure (carbon border adjustment tax) but if it is necessary we will not hesitate to take it.”

Over the last year, there has been particularly in Europe much greater social mobilisation and public pressure calling governments to set up efforts to address climate change. This public pressure has been buttressed by more robust science and scientific assessments calling for increased efforts over the decade. A ramp up of climate and environmental measures is at the core of EU President Ursula von der Leyen approach.

As a candidate, von der Leyen said that to meet the goal of carbon neutrality by 2050, the EU would have to move faster and this would require all sectors of the economy to take measures to reduce emissions. A price on greenhouse gas emissions to incentivise producers and consumers to reduce emissions is a central component of this effort. However, this tax on emissions could put European industries at a disadvantage compared to industries in countries that are not taking similar measures. The carbon border adjustment tax is an instrument to ensure that companies can compete on a level playing field, avoid carbon leakage and prevent companies to migrate out of the EU.

Experts say that a border adjustment tax can be designed to be WTO compliant.

A border adjustment tax would impact all countries outside the bloc particularly countries with high levels of trade with the EU such as China. Speaking to the media in Madrid last week, Tsinghua professor and member of the Chinese delegation to the UN climate talks, He Jiankun said a carbon tax would run counter to the principles of the Paris deal.

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