Green Trade Tax Rejected
Monday, December 18th, 2006The European Union’s trade commissioner will on Monday dismiss French proposals for a “green†tax on goods from countries that have not ratified the Kyoto treaty as not only a probable breach of trade rules but also “not good politicsâ€.
Peter Mandelson says that the levy, aiming to cancel the competitive advantage of countries that are not cutting carbon emissions to fight global warming, would be “highly problematic under World Trade Organisation rules and almost impossible to implement in practiceâ€.
The proposals are gathering support after Günter Verheugen, industry commissioner, backed the idea after it was separately proposed by an advisory group of EU government officials and industry leaders he co-chairs.
“Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules,†Mr Mandelson will warn in a podcast speech to 50,000 subscribers. “How would we choose what goods to target? China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not ratified but states like California have ambitious climate change policies.â€
Above all, he says, it would undermine the international co-operation required to combat climate change.
Dominique de Villepin, the French prime minister, embraced the idea last month amid fears that EU efforts to curb emissions are driving up power prices and industrial costs.
In contrast, Mr Mandelson backs a plan, to be unveiled this week, to include in the EU’s carbon emissions trading scheme all airlines landing or taking off in the EU, even though it is likely to antagonise the US and Asian countries.
Mr Mandelson, who favours a positive rather than punitive approach, is also writing to Pascal Lamy, WTO director-general, to suggest talks on scrapping tariffs on renewable energy and clean power generation equipment worldwide.
He also wants extra incentives for companies using environmentally sustainable methods to be built into a new generation of bilateral deals the EU is negotiating. Mr Mandelson says the rich world has “an historical environmental debtâ€, having contributed to 80 per cent of carbon emissions worldwide to date, and must lead the way.
He accepts there will be some pain in the short-term for industry but this could be offset by services growth selling European environmental know-how.
What he calls “climate security†is the biggest political challenge of the day. In early January, the European Commission will launch an energy policy, based on market liberalisation, efficiency savings and a faster shift to renewable sources and cleaner technology.
¦ Airlines could profit by £2.7bn ($5.3bn, €4bn) from their inclusion in the EU’s greenhouse gas emission trading scheme, according to an analysis published on Monday by the UK’s Institute for Public Policy Research, a left-leaning think-tank.
A separate report by WWF, the conservation charity, suggested that airlines, many of which have protested against being included, would profit by €3.5bn ($4.6bn, £2.3bn).
Both reports assume that airlines would be given free allowances for the amount of carbon dioxide they could emit, but that they would pass on the notional cost of buying the allowances to airline passengers.
But in practice airlines might find it difficult to profit from emissions trading in this way, given the fierce competition over prices on many routes.