EU CLIMATE STRATEGY: BORDER MEASURES REMAIN AN OPTION

A new European climate strategy launched by the Commission leaves the door open to the use of controversial border measures to safeguard the competitiveness of energy-intensive industries.

The drafting of the new European climate and energy package (see related story, this issue of the BioRes) was followed closely by both industry and green lobbyists.

Representatives of heavy industry, including sectors such as steel, cement, chemicals and paper, voiced major concern over potential competitiveness losses with regard to emerging giants like China and India, where industry faces less stringent climate requirements. Philippe Varin, president of the European Confederation of Iron and Steel Industries, used the so call 'leakage' argument, warning that "if we were to relocate our industries outside Europe [because of steel production becoming unviable due to climate costs] we would then have to transport steel to Europe, adding emissions."

France has led a European call for a climate levy on imports that have been produced without regard to climate concerns.

José Manuel Barroso, President of the European Commission, agreed when he introduced the new climate and energy package to the European Parliament that "There is no point in Europe being tough if it just means production shifting to countries allowing a free-for-all on emissions". Therefore, he said that "if our expectations about an international agreement are not met, we will look at other options such as requiring importers to obtain allowances alongside European competitors, as long as such a system is compatible with WTO requirements."

Europe to wait and see

The draft European climate and energy package does not now include provisions requiring polluting exporters to buy EU emissions permits. However, it does leave the door open for a decision on the issue at a later stage. Under the European Emissions Trading Scheme, a large portion of emissions allowances will be auctioned out, with a smaller portion handed out for free. However, all allowances to energy-intensive industry may be given free of charge in order to address competitiveness concerns. A decision will be taken in 2010, when there is more clarity regarding the global climate change regime.

"An international agreement is our absolute priority," stressed Barroso. "But let me be clear, if we do not make progress we will protect European companies." He said that the EU "was not seeking to introduce protectionist measures," but rather asking its trade partners to join Europe in its efforts to combat climate change.

Concern over green protectionism

Other players cautioned against a system setting up carbon barriers. US Trade Representative Susan Schwab and European Trade Commissioner Peter Mandelson brought up the issue during a meeting in Washington on 21 January. Following the meeting, Mandelson said "I don't believe that trade restrictions are the way forward for combating climate change." A Chinese trade official voiced a common developing country concern when commenting that "I doubt whether the measures taken in the name of the environment will always be applied to protect the environment and not to protect domestic industries."

Current draft climate change bills under consideration in the US Senate also include provisions that would require trade partners that do not undertake strict climate change policies to buy 'emissions offset' at the US border. US climate legislation is still at an early stage of the legislative process and years will likely pass until new climate change laws come into force.

Whether or not border taxes would be WTO-compliant remains the subject of debate.

ICTSD reporting; "EU Executive Adopts Blueprint for Climate Fight," REUTERS, 24 January 2008; "EU Countries Get Renewable-Energy Targets," WALL STREET JOURNAL, 24 January 2008; "EU sets emissions targets to fight climate change," AFP, 23 January 2008; "EU threatens trade partners over global warming," AFP, 23 January 2008; "Green barricade: Trade faces a new test as carbon taxes go global," FT, 23 January 2008.