EU Green Deal Includes Climate Border Measure

EU Green Deal Includes Climate Border Measure

This piece was originally published in the March/April 2020 issue of electroindustry.

by Craig Updyke, Director, Trade and Commercial Affairs, NEMA

The European Union (EU) adopted a Green Deal policy paper in December 2019 that commits the 27-nation bloc to use trade policy in promotion of carbon emission reductions. Overall, the EU aims to achieve full carbon neutrality by 2050 through a series of policy initiatives leading to the decoupling of economic growth from resource use, according to the document.

Embedded in the paper is a commitment to propose to Member states “a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage” into the EU. Such a measure would “ensure that the price  of imports reflect more accurately their carbon content.” EU advocates of such a measure have previously indicated it would be aimed at imports from countries such as the United States, which is not a party to the United Nations Paris agreement to reduce global carbon emissions.

The border adjustment mechanism, which would likely take the form of a tax or import tariff, “will be designed to comply with World Trade Organization (WTO) rules and other international obligations of the EU” and “would be an alternative” to current carbon  leakage risk mitigation measures such as free allocation of emission allowances and compensation for increased electricity costs. WTO rules allow Member states to impose regulations for environmental protection and conservation of exhaustible natural resources, but they are required to be well designed and minimize barriers to trade. Orgalim, representing Europe’s engineering industries, warned that the EU must be cautious and carefully reflective in its design of measures to address leakage of carbon into the EU from “countries that do not share Europe’s climate ambitions.”

Although it is unlikely the Commission will move forward quickly in 2020 with a proposal, U.S. electroindustry companies that sell into Europe should be aware of this emerging primary risk as well as possible proliferation of such measures around the world similar to EU-originated regulations on chemicals, use of hazardous substances in electrical and electronic equipment, and end-of-life equipment management.

Among myriad policy proposals, including sustainable finance, circular economy measures, and evaluation of rules on government subsidies, the Green Deal paper also references the bloc’s inclusion of climate commitments in its trade agreements. “The Commission will propose to make the respect of the Paris agreement an essential element for all future comprehensive trade agreements.” In addition, the  power and advocacy of the EU will be used to “shape international Standards that are in line with EU environmental and climate ambitions.”

COMMERCE ICTS SECURITY RULEMAKING RAISES UNCERTAINTY

In January, NEMA joined 30 technology and business trade associations in a letter to Commerce Secretary Wilbur Ross raising concerns about the transparency and uncertainty of a proposed process through which the  Secretary  could block or force the unwinding of U.S. companies’ transactions in information and communication technology and services with a “foreign adversary.” NEMA and the other signatory organizations— including the Edison Electric Institute—urged the Secretary to recast the proposal with more clarity and detail and then seek additional comments from the public. The Secretary’s authority derives from a May 15, 2019, Executive Order on Securing the Information and Communications Technology and Services Supply Chain. ei

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