Analysis: EU pushes back on carbon cuts, challenges others to follow


European Commission President Ursula von der Leyen presents new EU climate policy proposals as EU Commissioner Paolo Gentiloni sits next to her in Brussels, Belgium on July 14, 2021 . REUTERS / Yves Herman

  • The EU package could become a global benchmark
  • Long transition period could reduce resistance
  • U.S. position not yet fully established

BRUSSELS, July 15 (Reuters) – The European Union is using its weight as a rich trading bloc of half a billion consumers to set the global pace of action on climate change, challenging others to live up to the ambitions of its latest carbon emission reduction plans.

The question now is whether the EU bet becomes an established benchmark on which investors and sectors like the auto industry define transition strategies and how large emitters like the United States and China react before the UN climate talks later this year.

“Among the G7 and G20 countries, the EU’s position is now the explicit global benchmark,” said Julian Poulter, head of investor relations at Inevitable Policy Response, an environmental economics consultancy. .

“This will exert a new influence on this base, in other industrialized countries and their financial sectors and will increase the pressure on countries which remain outliers and climate spoilers,” he added.

In its most ambitious attempt to date to achieve a target of reducing net greenhouse gas emissions by 55% from 1990 levels by 2030, the EU on Wednesday presented proposals that would relegate the internal combustion engine to history and would increase the cost of carbon emissions for heating. , transport and factories. Read more

A proposed border carbon tax would seek to impose a carbon price on trading partners that reflects the level set by the EU’s carbon emissions market, the largest of its kind in the world.

Paolo Gentiloni, EU commissioner for economic affairs, said a 10-year transition from 2026 for the carbon tax on goods such as steel, fertilizers and cement would give others time to adjust .

“At the same time, we cannot wait for a rather difficult global carbon pricing system to take place because we know, knowing our partners, that this discussion will take years and years,” he told the reporters, acknowledging that there was overall “a lot of attention, curiosity and concern” about the plan.

The fact that the tax is only phased in from 2026 could help overcome China’s initially negative view of it given the high level of carbon “embedded” in its imports to Europe.

Although there has not yet been a reaction from Beijing, researchers at Tsinghua University already concluded in a paper in May that the impact would wear off over time and there was no evidence that the tax would have a long-term negative impact on China’s development.

With aluminum, cement, electricity, fertilizers, iron and steel the first products targeted, this could have more impact on small economies like Russia and Turkey. Moscow estimates that $ 7.6 billion of its goods could be subject to the EU tax.

Australia says it smacks of protectionism. The tax could trigger a World Trade Organization challenge, although the EU executive says it is legally sound. Read more

A STARTING POINT

Polls of voters across Europe – who suffered deadly flash floods this week after record rainfall that some officials have linked to global warming – show climate change is a growing concern for many of its citizens. Read more

Although it itself accounts for just 8% of global greenhouse gas emissions, the EU hopes to use its influence as the world’s largest consumer market to set the climate agenda as it does. has done in areas ranging from food labels to labor standards.

Andre Sapir, senior researcher at Brussels-based think-tank Bruegel, described it as the starting point for discussions with other trading powers, with compromise inevitably required.

“Just saying ‘take it or leave it’ won’t work,” he said. “It is also an experience and we have to see how it goes.”

Ultimately, the response of the United States, the world’s largest economy and the world’s largest oil producer, will be critical – and unpredictable given its domestic politics heavily polarized on tackling climate change.

Morgan Bazilian, director of the Colorado-based Payne Institute for Public Policy, said Washington was much more likely to be a partner now than it was during Trump’s day, but was still “far enough away from being fully on board. “.

U.S. Treasury Secretary Janet Yellen told Reuters on Tuesday that carbon pricing schemes are an effective way to address emission reductions, but should take into account progress made in reducing emissions by d ‘other means. Read more

“There is some degree of engagement between the EU and the US on carbon pricing, but the direction of the journey is unclear,” said Thijs Vandenbussche, climate policy analyst at the European think tank. Policy Center.

Time may be the deciding factor, as well as the fact that the United States exports very little of the original products subject to the levy.

The proposals announced on Wednesday will face years of debate among the 27 bloc countries and lobbying from industrial interests, but the EU has a proven track record in promoting the world’s uneven responses to a growing climate crisis.

Since the 2015 Paris agreement on reducing emissions, Europe has been the first continent to declare a goal of carbon neutrality by 2050, prompting others to follow suit.

It’s too early to assess whether Europe has taken the global climate change effort one step further, but at least several of its own large industrial companies were quick to lend their support on Wednesday.

Swedish automaker Volvo, which in March said its lineup will be fully electric by 2030, said the package offered “a path to an electric future and enough time to phase out technology from the past.”

Additional reporting by Simon Jessop in London, David Lawder in Washington, David Stanway in Shanghai; edited by Jane Merriman

Our Standards: Thomson Reuters Trust Principles.


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