EU should not rush carbon border tax – German official

German government officials and MPs have cautioned against a quick introduction of a carbon border adjustment mechanism in the European Union. “Intellectually, the concept is great, but it has to be implemented in practice, and we have to do it in a way that it is manageable for our economy,” said Philipp Steinberg, Director-General of Economic Policy in the economy ministry at a discussion organised by energy dialogue platform Forum für Zukunftsenergien. The government is gauging the effects of several possible models, said Steinberg, highlighting the need for a thorough economic and legal analys. The Free Democratic Party’s (FDP) climate policy spokesperson Lukas Köhler warned using a carbon border tax to pressure other countries to act – as he said European Commission president Ursula von der Leyen had done at the World Economic Forum in Davos – could quickly lead to trade disputes. “Thus, I'm against a rush job.” Michael Rodi, director of the Institute for Climate Protection, Energy and Mobility (IKEM) said due to a need to act on climate, the EU should use the current window of opportunity and quickly introduce a mechanism. Asked about compliance with World Trade Organisation (WTO) rules, Rodi said legal certainty in the end might only come through WTO dispute settlement. “Just do it,” said the law professor. “A tax solution continues to be politically risky, because unanimity is necessary in the Council.” To minimise risks of any design, the focus should clearly be on CO₂-intensive products with a high carbon leakage potential, it must be made clear that the instrument serves climate action, and all trade partners have to be treated equally, Rodi said.

As part of the Green Deal, the new European Commission under President Ursula von der Leyen has proposed the introduction of a carbon border adjustment mechanism for selected sectors to reduce the risk of carbon leakage. This could be a carbon tax on imported goods – aligned with the products’ CO₂ emissions – if no sufficient carbon price had yet to be paid abroad. At the same time, EU exporters would be compensated for inner union carbon prices when they send goods outside the bloc. “The carbon border adjustment will be fully compliant with WTO rules,” a Commission spokesperson told Clean Energy Wire. She confirmed that the Commission is expected to make a proposal over the course of 2021, as proposed in an annex to the Green Deal communication.