However, the European Parliament, in its CBAM report, has provided for a much broader scope.
Much-needed diplomacy, many opportunities
But perhaps the greatest difficulty faced by the CBAM is its integration into the international framework. The potential for conflict in this area is considerable, both in trade law and climate policy. While most countries have already made commitments to climate protection, the approaches chosen are difficult to compare, as the Paris Agreement is largely based on voluntarism. A global price for carbon remains a long way off. Instead, the vast range of national approaches reflects the whole spectrum of preferences, priorities and assumptions of countries as diverse as Russia, Tuvalu, Saudi Arabia, Sweden, Canada and Costa Rica.
Introducing the CBAM into this extremely heterogeneous landscape could be perceived as a shift towards economic protectionism. The CBAM could thus be misunderstood and discredited while raising the risk of retaliatory trade measures, which is what the Federation of German Industry (Bundesverband der Deutschen Industrie) fears. If major economic powers such as the United States and China, or countries such as India and Brazil, joined forces against the CBAM, it would become near impossible to impose, politically speaking. The EU has already learned this the hard way, but for a slightly different issue - including international flights in the EU Emissions Trading Scheme. And although the CBAM is not intentionally targeting developing countries, they could also be hit hard, especially those with administratively weak or poorly diversified economies. This requires careful consideration at an early stage.
A successful diplomatic offensive could pave the way for cooperation that would strengthen international climate protection. To achieve this, we could build on all the climate action projects and pledges made around the world. The European Commission already seems to be inviting discussion with key trading partners and top CO2 emitters such as the United States, China and Russia. To avoid border adjustment measures between trading partners, consideration should be given, for example, to how we judge which climate protection measures have an equivalent impact.
In 2021, European climate diplomacy will have more than one ace in the hole. First of all, there is the political reorientation of the United States. Meanwhile, the G20 summit will be hosted by EU Member State Italy and the UN Climate Change Conference will take place in Glasgow after being organized jointly by Italy and the United Kingdom. According to some media sources, Boris Johnson is considering putting the carbon border adjustment mechanism on the agenda for the British presidency of the G7 in 2021. Furthermore, the WTO has recently established a Trade and Environmental Sustainability joint initiative group which includes the EU and which is beginning to show some interest - at least informally - in the CBAM. Multilateral forums could thus be used to encourage discussions between states as well as between climate and trade policy actors.
That said, the revenue generated by the border adjustment scheme would also open up certain possibilities for external policy. The Commission estimates this revenue to be between 5 and 14 billion euros annually. These funds should be used to pursue climate goals. For example, they could be included in the funding provided by the UN climate change regime to support developing countries in building climate-friendly economic structures. Unfortunately, the EU currently seems to be moving in a different direction. Revenue from the CBAM will likely go back into the EU budget to increase its own resources and to participate in the financing of the post-Covid-19 recovery plan for Europe.
This issue will be of critical importance throughout the year and is sure to provoke lively debate. The European Commission sometimes asserts that, ideally, there would be no need to establish the CBAM. And indeed, if other countries committed to equally ambitious climate policies, it would no longer be necessary. But the alarming trend in emissions continues to show us how far we are from a climate-friendly economy. That is why we must try and achieve these long-term goals through the most appropriate short-term measures and structural decisions, globally. Implemented with ambition, the European Green Deal has a major role to play. A CBAM that takes both trade law regulations and climate goals into consideration can be a valuable part of this scheme. Now the EU must have the confidence not only to guarantee this to its partners - but also to win them over.
Copyright: BORIS HORVAT / AFP
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