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Birds fly above a closed steel factory in Tangshan, Hebei Province, China, on February 27, 2016, with chimneys from another operational facility in the backdrop. Kim Kyung-Hoon/Kim Kyung-Hoon/Kim Kyung-Hoon/Kim Kyung-Hoon/Kim Kyung-Hoon/ (Reuters) – BRUSSELS, July 5 (Reuters) – The European Union has an uphill battle convincing trading partners that the world’s first carbon import tax is fair, workable, and essential to the bloc’s ambitious green revolution rather than a protectionist instrument. On July 14, the EU is expected to unveil a package of measures aimed at reducing net greenhouse gas emissions by 55 percent by 2030 compared to 1990 levels. It will describe a carbon border adjustment mechanism (CBAM) as part of the plan, which is intended to reduce emissions by establishing financial incentives for cleaner manufacturing and limiting “carbon leakage,” or the transfer of activities to countries with less stringent emission rules. The union will want to avoid the kind of backlash it saw after excluding palm oil from its list of sustainable biofuels in 2018, which generated legal challenges from Indonesia and Malaysia at the World Trade Organization. Prior to that, an EU proposal to tax foreign airlines for carbon emitted on flights into and out of Europe threatened to spark a trade war after the United States’ aviation industry mobilized significant political opposition and China threatened to halt aircraft deliveries. In 2012, the European Union was obliged to announce that the regulation will be suspended. The CBAM, according to Bernd Lange, the chair of the European Parliament’s trade committee, might become a source of trade disputes, particularly with the United States, if Brussels fails to reach an agreement with Washington. “We need to get an agreement so that this CBAM does not end up in a WTO dispute. This is a significant undertaking for the coming months “During a webinar, he stated. The Commission claims that their plan is WTO-compliant and equitable, requiring importers of items like steel to purchase emission permits at the same price as domestic producers. However, if EU producers insist that they continue to receive free EU carbon market certificates, this could cause complications if imports are not given the same benefit. Free permits would be phased out in a draft of the July 14 proposals, although manufacturing industries are expected to fight hard to keep them. find out more Benchmark prices on the EU’s emissions trading system (ETS), the world’s largest carbon market, have surpassed 58 euros per tonne this month, mainly due to expectations of the border levy. While the EU claims that it and the US have agreed to talk about the idea, some countries have expressed reservations. Any carbon levies, according to Australian Prime Minister Scott Morrison, are “trade protectionism by another name.” Russia has stated that it may violate trade agreements. find out more Andre Sapir, a senior scholar at the Brussels-based think tank Bruegel who spoke before the European Parliament on the CBAM, believes the European Union must look beyond legislation. “There’s also the problem of justice. Long-term emitters have been advanced countries. Deforestation was also practiced by sophisticated countries “he stated PROOF RESPONSIBILITY The World Trade Organization (WTO) and the European Union (EU) both give developing countries preferential treatment. Charges could damage $16 billion in developing nation exports to the EU if they don’t extend to the CBAM, according to the Centre for European Reform think tank. Even a WTO-compliant system with emerging-market concessions could stymie commerce if it imposes an excessive administrative overhead. Companies in nations with current emissions trading regimes, such as South Korea, may be able to transition to the CBAM without difficulty. Exporters would have to disclose thorough data on their direct carbon emissions and those of their energy sources in other countries, and then persuade the European Commission that the data is accurate. Otherwise, they may be subjected to a less-than-favorable default calculation. “The onus of proof is on the opposite side,” said Hosuk Lee-Makiyama, director of the ECIPE trade think tank. “CBAM may be a wonderful trade gambit, but will it genuinely incentivize CO2 emission reductions?” Because of the system’s complexity, the European Commission decided, at least initially, to focus on a few fundamental materials: iron and steel, aluminum, cement, energy, and fertilisers, which account for around 5% of EU goods imports. However, exporting countries may be able to get around these restrictions. Possible substitutes for cement, such as fuel ash or blast furnace slag, may not be subject to carbon taxes, according to Thijs Vandenbussche, climate policy expert at think tank the European Policy Centre. The CBAM could influence end-use product producers to switch components downstream. These may be greener in certain circumstances, but they are not subject to additional emission charges in others, despite being as harmful as or more polluting. Global emissions would not decrease in this circumstance. The EU will require allies if its experiment is to be successful. The formation of a transatlantic alliance could help to achieve universal approval. However, US climate envoy John Kerry’s statements that a carbon border tax should only be used as a “last resort” imply that such an alliance is still a long way off. In the recent year, just over 50 WTO members began discussions on climate problems like as carbon border adjustments, although they are still in the early stages. The CBAM has had the effect of making the argument more urgent. “One of the slowest topics to progress is international carbon price,” Vandenbussche said. “There would be greater controversy if this proposal did not exist. This could lead to talks and possibly revisions based on the worldwide response.” Philip Blenkinsop contributed reporting, while Mark John and Barbara Lewis edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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