Mohammed Chahim believes that support is needed to clean up the industries of least developing countries in order for the proposed levy to conform with WTO rules.
Revenues from the EU’s planned carbon border tax should be used to help the poorest countries decarbonise their polluting industries, a lawmaker leading on the issue has proposed.
Mohammed Chahim (a Dutch centre-left MEP) requested that additional climate finance be provided to low-income countries affected by the proposed levy on carbon intensive goods imported to the Union in a draft document submitted to the European Parliament. Climate Home News saw it.
The report, due to be debated by lawmakers in early February, is a response to the European Commission’s proposal for trade partners to pay a carbon price equivalent to that paid by EU business.
Chahim’s proposed amendments would broaden the scope of the tax and roll it out faster, with some support to soften the blow for the least developed countries (LDCs).
“It’s important that we cooperate rather than be confrontational with our trade partners,” he told Climate Home News. The tax “should not disproportionally affect least developed countries”.
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The levy is intended to prevent “carbon leakage”: heavy industry fleeing Europe for countries with lower environmental standards as the bloc decarbonises.
Experts raised concerns that it could cause harm to certain poor countries who rely heavily upon trade with the EU, but bear little responsibility for the climate crisis.
Chahim’s report calls for the levy, due to come into force in 2026, to be introduced sooner and on a wider range of imports, adding organic chemicals, hydrogen and polymers as sectors initially covered by the tax.
A transition period would be shorted from three to two years and free allowances would be phased out by the end of 2028 – eight years earlier than the Commission proposed.
There would be no general exemption for LDCs under Chahim’s plan from these rapidly rising costs.
Instead, additional climate finance “at least equivalent in financial value” to the revenues generated from carbon adjustments at the border would be earmarked to support the decarbonisation of LDCs’ heavy industries. This would lower the cost of future tariffs.
The Commission would be required to report annually on how these additional funds were used to address climate change among low-income countries.
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Climate Home was informed by Chahim that support for LDCs was required for the carbon levy’s compatibility with the World Trade Organisation rules. These rules regulate trade between nations through reducing barriers and preventing discrimination.
These rules allow countries the ability to adopt trade-related measures to preserve the environment. If the revenues generated support the decarbonisation of LDCs’ industries, then the policy is justified as an environmental measure, Chahim said.
“We believe this is a necessary condition to be WTO-compatible,” he explained.
While there is broad support among lawmakers for using the levy’s revenues as additional climate finance, some EU member states are expected to argue servicing EU debt must come first.
For Tim Gore, who heads the climate and circular economy programme at the Institute for European Environmental Policy, how the revenues are used will be critical to the EU’s ability to convince its trading partners of the value of its policy.
“It is important for the EU to show that it has found new, additional and more practicable climate finance,” said Gore. “This is going to be a key part of the diplomatic puzzle. If the EU wants to get this through with international trading partners, it is going to have resources on the table for support.”
He said that financing the decarbonisation in LDCs would be a precedent for other countries, such as Canada, who are considering a carbon border tax.
While the major emerging economies have dismissed the levy for being unfair, the low-income nations are still grappling with the implications of the proposal.
Aluminium dominates Mozambique’s exports, more than 80% of which go to the EU, for example. The proposed tariffs are also highly applicable to other African countries like Cameroon and Guinea, Zimbabwe, Zambia. Algeria, Morocco, and Zimbabwe. Not all of them qualify as LDCs.
Saliem Fakir, executive director of the African Climate Foundation, welcomed Chahim’s report as “opening the debate” on applying equity principles to the EU’s plans.
But he told Climate Home more could be done to turn the levy into an effective transition mechanism for the bloc’s trading partners.
Fakir argued that LDCs containing very low carbon intensity, such as Mozambique, should be exempted from the scheme.
Source: Climate Change News
