The carbon border tax is a proposed measure by the European Union (EU) to reduce carbon emissions by imposing a duty on imports based on their carbon footprint. It forms part of the European Green Deal, which aims to make Europe climate-neutral by 2050. This tax is essentially aimed at discouraging carbon emissions and affecting production and exports. It represents an evolution from a national carbon tax, which governments impose on companies within their jurisdictions that burn fossil fuels.
Motives Behind the Implementation of the Carbon Border Tax
The EU has committed to slashing its carbon emissions by a minimum of 55% by 2030 relative to the emission levels in 1990. As of now, it has managed to reduce these levels by 24%. However, imports contribute to 20% of the EU’s CO2 emissions, and these emissions are on the rise. Consequently, the EU believes a carbon border tax could incentivize other nations to minimize GHG emissions, reducing the EU’s carbon footprint. Furthermore, there are concerns about ‘carbon leakage’, where businesses, due to the high costs of operating within the EU’s Emissions Trading System, might move to countries with lenient or non-existent emission limits, thereby increasing global emissions.
Concerns Over the Carbon Border Tax: A Global Perspective
The carbon border tax proposal has been met with resistance, particular from the BASIC countries (Brazil, South Africa, India and China). These nations argue that the tax is discriminatory and contradicts the principles of equity and ‘Common but Differentiated Responsibilities and Respective Capabilities’ (CBDR-RC), which uphold that wealthier countries should provide financial and technological aid to developing nations combating climate change.
Moreover, the EU’s proposed uniform environmental standards globally contradict the consensus in Article 12 of the Rio Declaration, which asserts that developed countries’ standards can’t be applied to developing nations.
Impact on India and Other Nations
The carbon border tax may place third-party nations such as India, whose third-largest trading partner is the EU, at a disadvantage. This tax could heighten the prices of Indian goods in the EU, diminishing their appeal and potentially reducing demand. For companies with a higher greenhouse gas footprint, this could present severe, near-term challenges.
Moreover, this proposal might require a restructuring of the climate change regime to account for imports’ greenhouse gases at the point of consumption rather than production. This move could flip the current climate change regime on its head.
Additionally, critics argue that this policy could serve as a guise for protectionism, thereby bolstering domestic industries at the expense of international trade and potentially leading to ‘green protectionism’.
A Way Forward
While India and other nations might feel targeted by this EU’s policy, it’s essential to note that the actual targets are large carbon emitters and major exporters of steel and aluminum to the EU like Russia, China, and Turkey. Thus, opposition from India might not be necessary; instead, direct talks with the EU for bilateral settlement could be beneficial.
While a mechanism like the Carbon Border Tax, which charges imported goods at borders, could stimulate the adoption of cleaner technologies, it might disadvantage developing countries if there’s inadequate assistance for new technologies and finance. It’s crucial for India to evaluate the potential benefits and drawbacks of this tax and engage with the EU through bilateral discussions.
Related UPSC Civil Services Exam Questions:
Q1 – (2019) The ‘General Data Protection Regulation’, a law on data protection and privacy for citizens, was adopted and implemented by (a) Australia (b) Canada (c) The European Union (d) The United States of America. Answer: (c)
Q2 – (2017) The ‘Broad-based Trade and Investment Agreement (BTIA)’ is a negotiation between India and (a) European Union (b) Gulf Cooperation Council (c) Organization for Economic Cooperation and Development (d) Shanghai Cooperation Organization. Answer: (a)