The recently agreed EU Carbon border adjustment mechanism (CBAM) could slow down rather than boost global decarbonisation efforts.
A carbon tax could create two separate supply chains, one "clean" for countries with emissions trading schemes and the other "dirty" for poor countries, Bloomberg Opinion columnist Mihir Sharma wrote in a column on The Washington Post.
CBAM is said to be designed to prevent "carbon leakage" so that producers of goods with a high CO2 content do not have an advantage over those who have invested in reducing their carbon footprint. However, there is a risk that instead of decarbonizing, companies from the Global South will focus on developing countries.
"These are precisely the regions where the most concrete will be poured and steel will be used over the next decade. Indeed, the largest increase in potential emissions over the next decade will come from production and consumption in the global south," Sharma wrote.
He noted that companies from developing countries can reject unrealistic European standards. Although most trade restrictions cause some degree of inequity, scientific analysis has shown that the welfare gain in selected developed countries from CBAM would be $141 billion. And annual welfare losses in developing countries will reach $106 billion.
In addition, countries in the Global South lack the detailed emissions data needed to accurately certify specific manufacturers.
There are calls to use some of the revenue from CBAM to support decarbonisation in the Global South, it said. The "Global Climate Alliance", proposed at the COP27 Climate Summit, was aimed at finding reliable ways to stimulate decarbonisation by sharing revenues from carbon taxes.
"Unfortunately, the European Parliament has already happily spent part of this money on bribing some eastern EU members to agree to the European Green Deal," Sharma wrote.
He added that a viable climate alliance could build on the G-7's idea of a "climate club," offering different treatment to its members. Such efforts should include creating ways for the region or country to comply with the new European regulations. Lower verification requirements could be imposed on exporters from Bangladesh, for example, along with a less stringent carbon tariff than that levied on exporters from China or the United States.
Sharma said Europe must find ways to help other countries comply with its rules.
Earlier, EcoPolitic wrote, that in December the participants of the EU negotiations reached an agreement on CBAM (carbon border adjustment mechanism), which will cover imports of hydrogen, iron and steel, cement, fertilizers, electricity and aluminum.
As EcoPolitic previously reported, in the global fight against climate change is important revision of world trade policy standards. The solution lies in increasing taxes on "dirty" goods and exempting them from tariffs on "green" goods.
