EU's Carbon Border Tax: Implications for Non-EU Countries
The European Union is considering implementing a carbon price for imports as a strategy to decrease global emissions. This proposal, known as the Carbon Border Adjustment Mechanism (CBAM), could have significant implications for developing countries, particularly those with high carbon footprints.
In a recent study, Lilia Maximova, Gabriela F. Kilpp, Natalia Koto, and Bárbara Martins, MA students at the Willy Brandt School of Public Policy, have examined the potential impacts of the CBAM on countries such as Guatemala, Morocco, Vietnam, and Mozambique.
Guatemala, with a carbon intensity of 56.3 gCo2/MJ, and Vietnam, with a high carbon intensity of industrial consumption at 43.5 gCO2/MJ, could be particularly affected. Any exports to the EU from these countries would likely be subject to BCA taxation, potentially impacting their economies.
Morocco, an important trade partner of the EU, could also be affected. While Morocco would be less impacted by an EITE tax due to its lower carbon intensity, applying either BCA policy could hinder ongoing negotiations to establish a Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Morocco.
On the other hand, countries like Mozambique, with a low carbon intensity rate of industrial consumption (13.4 gCO2/MJ) and most of its electricity from renewable sources (86%), would need to prove the carbon content of its products, creating a significant administrative burden.
The authors of the study are passionate about the topics of energy transition, natural resource justice, global energy transition, global climate governance, and the energy transition in the Global South. They suggest a gradual implementation of an EU BCA while facilitating technology transfer and contributing to technical capacity building could address justice aspects of emission reduction measures imposed on countries with historically low emissions.
Moreover, transitioning to clean energy would allow countries to lessen their exposure to a BCA and address issues commonly faced by developing countries such as clean energy access. For instance, Vietnam has a high potential for solar and wind energy to lower its carbon footprint.
The trade and carbon intensity data used in the article were compiled by the IASS team from World Bank, UN, and IEA sources as part of ongoing research on border carbon adjustment. The authors emphasize that the impact of a BCA varies significantly depending on whether it is implemented for all products or only over EITE sectors.
In conclusion, the EU's Carbon Border Adjustment Mechanism could pose economic risks and strain development for countries with high carbon footprints. However, a thoughtful and gradual implementation, coupled with support for technology transfer and capacity building, could help these countries transition to cleaner energy and mitigate the impacts of the CBAM.
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