Carbon Market Watch Newsletter – October 2019

Stronger climate action should be the main goal of an EU carbon border tax

Dear friends,

Tomorrow was supposed to start the count-down to the much-touted “European Green Deal”. The rejection of three Commissioner-candidates by the Europen Parliament means that Ursula von der Leyen’s team is not able to start their work at least before December, but recent news suggests that the Green Deal could nevertheless come as soon as mid-December.

The Green Deal is von der Leyen’s response to voters’ concern about the climate crisis which has manifested itself in election success across the continent for parties promising climate action. The climate package is set to include initiatives from a just transition fund to legislation enshrining the climate neutrality goal in the EU law, and a proposal to raise Europe’s 2030 climate target to at least 50%. Von der Leyen also wants to make airlines to pay more for their pollution under the EU carbon market and to extend the market to include shipping. These are all important steps in the right direction and at Carbon Market Watch we will closely monitor the progress over the following months and advocate for a credible implementation of these ideas.

Von der Leyen further promises to introduce a carbon border tax on foreign imports to protect EU companies against lower-cost foreign competitors and to encourage the rest of the world to take more ambitious climate action. The idea has become something of a “hot topic”, but it should not distract us from the need to deal with industrial pollution in our own backyard. Carbon pollution from Europe’s heavy industry is not going down and thanks to the over-generous free allocation under Europe’s carbon market, the sector has no incentive to clean up its act. Therefore, an EU carbon border tax should only be introduced on the condition that free allocation is phased out. You can read more about our views on the possible carbon border tax in this recent opinion piece.

The Green Deal’s success will depend on how the initiatives translate into concrete climate action. Nowhere is the need for clear measures more acute than for the European steel, cement and chemicals industry. The Commission must urgently put forward an industrial climate strategy which puts a stop to the untargeted protection of polluters and instead ensures that the heavy industry starts reducing its greenhouse gas pollution. In this regard, the internal market portfolio will be a position to keep an eye on. Following the rejection of Sylvie Goulard, President Macron has appointed former finance minister Thierry Breton for the job. A computer scientist by training, Breton is described as a strong advocate for using digitalisation to advance the circular economy and climate action. We will be eager to hear how he – if confirmed – plans to align the EU industrial policy with Europe’s climate goals.

Happy reading,
on behalf of the Carbon Market Watch team,

Kaisa Amaral
Communications Director

*The Chilean government has pulled out of hosting this year’s UN Climate Change Conference. At the time of writing, we are awaiting official information from the UNFCCC Secretariat on a new venue and possible changes to the timing of COP25. This may have implications for our preCOP briefing. Information will be updated on the event page.

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