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Russia warns EU against carbon border tax plan, citing WTO rules

July 29, 2020
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By Paul Homewood

h/t Robin Guenier

 

Problems looming for the EU’s mooted carbon border tax:

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As Brussels gets serious about imposing levies on imports from polluting countries, Moscow argues such measures create unfair barriers to trade

Russia’s economic development minister warned last week that the EU’s plans to deploy a carbon tax at the bloc’s borders will not be in line with World Trade Organisation (WTO) rules, just as Brussels doubled down on the idea of green tariffs.

Maxim Reshetnikov said that Moscow “is extremely concerned by attempts to use the climate agenda to create new barriers”, following a meeting of the BRICS emerging economy nations last Thursday (23 July).

“We see a danger in this, including in the initiative to create a carbon adjustment mechanism that could essentially turn into new duties,” the minister said, referring to the European Commission’s plans to deploy a carbon border tax.

The anti-climate-dumping tool – still under design – would slap additional levies on imported goods that are manufactured in an unsustainable way, in order to boost domestic production and give offshore industries an incentive to go green.

But the border tax will have to walk a thin line between contributing to the EU’s green policies and sticking to WTO rules, which Russia – the world’s fourth-biggest emitter of greenhouse gases – already claims is unlikely to happen.

“It’s very important to us that all measures that are adopted in furthering the environmental agenda strictly comply with WTO rules, because the mechanisms that are now being proposed by some of our colleagues, in our view, contravene WTO rules,” Reshetnikov said.

The EU is not the only world power mulling the idea of loading borders with green tariffs, according to a draft of the American Democratic Party’s election platform, the US would do the same if Joe Biden defeats incumbent Donald Trump in this year’s presidential election.

“We will apply a carbon adjustment fee at the border to products from countries that fail to live up to their commitments under the Paris Climate Agreement because we won’t let polluters undermine American competitiveness,” the document states.

Biden has pledged to steer the US back into the Paris climate accord if elected president, after Trump decided in mid-2017 to trigger the lengthy withdrawal process, which is still not complete.

Green attitude adjustment

The carbon border tax is not just aimed at helping Brussels ratchet up its green credentials, it is also seen as a way for the EU to pay off the €750 billion debt the bloc’s member states agreed to take on at a Council summit last week.

Senior EU officials told Euractiv that the Commission considers the Council’s explicit approval of the border tax idea – as part of a basket of so-called revenue-generating ‘own resources’ – one of the main victories of last week’s crucial budget meeting.

According to its calculations for the next long-term budget and recovery instrument, the Commission predicts that a border tax could bring in between €5 billion and €14 billion every year “depending on the scope and design”.

In the final Council deal, leaders agreed that “the Commission will put forward in the first semester of 2021 proposals on a carbon border adjustment mechanism”, with a view to deploying it by the beginning of 2023.

Last week, the Commission launched a consultation and put forward four main ways the mechanism could work, ranging from a list of taxable goods and obligations on importers to buy permits, to an EU-wide tax on certain goods, whether they are imported or not.

A list of suitable imports, which EU officials have suggested could include Southeast Asian electric car batteries or even steel, is the most likely to fall foul of WTO scrutiny, while the idea of allowing the EU to tax products bloc-wide is a political no-go for most countries.

Forcing importers to buy permits, either from the EU carbon market (ETS) or a special pool, would require serious ETS reform. The Commission says in its consultation that the border tax would replace existing systems like free allocation of permits to certain industries.

Those gratuities are supposed to act as an incentive for manufacturers and other polluters to stay in the EU, in an effort to prevent the phenomenon known as carbon leakage. As a result, many companies benefit from millions of euros in avoided costs every year.

https://www.climatechangenews.com/2020/07/28/russia-warns-eu-carbon-border-tax-plan-citing-wto-rules/

 

international trade laws are so complex that lawyers don’t even understand them, so I have no idea what the outcome might be. But what we do know is that:

1) Border taxes would put up the cost of living.

2) The revenue raised would simply serve to feed the gargantuan EU budget, bringing no benefit to ordinary citizens.

3) Border taxes would inevitably bring retaliation from the exporting countries, damaging EU exports.

 

In any event, the money raised, said to be between €5 billion and €14 billion every year, is miniscule in comparison with the volume of trade involved. As such it is hardly likely to have much effect on imports from the BRICs.

 

Of course, if the EU was really serious about cutting emissions, it would shut down the Russian gas pipeline and stop work on the new one.

36 Comments
  1. Shoki Kaneda permalink
    July 29, 2020 7:04 pm

    These Climatistas are zealots. Laws, treaties, etc. mean nothing to them.

    • July 30, 2020 9:37 am

      WTO rules mean that whatever tariff is applied to one country must be applied to all. Being selective is not allowed.

      This works the other way too, of course, so countries couldn’t ‘retaliate’ against the EU as such with their own tariffs. They would have to apply any new tariff to all WTO member countries.

      The EU also has some trade agreements outside WTO with single countries, which is a different matter, but Russia isn’t one of those.

  2. Tim Spence permalink
    July 29, 2020 7:05 pm

    The EU really shouldn’t mess with Russia. Russia goes along with the climate scam as a nett beneficiary with regard to market prices. It could be interesting if Russia startted to rock the boat just a little, it has nothing to lose with oil at $40 per barrel.

    • Harry Davidson permalink
      July 29, 2020 8:06 pm

      Russia does not pursue the god of GDP. The people are reasonably prosperous and their govt. sees things under that topic as doing OK. Being the most prosperous people on the planet is not important. Given that is going OK, they have other objectives.

      • Curious George permalink
        July 29, 2020 8:23 pm

        Have you ever lived in Russia, or is your report based on fairy tales only?

      • Sobaken permalink
        July 29, 2020 10:06 pm

        I wonder what could possibly inform such perceptions and opinions of Russia. Probably watching RT propaganda and spending time on 4chan.

      • Phoenix44 permalink
        July 30, 2020 9:19 am

        That’s nonsense from top to bottom. Putin’s ambitions depend on GDP and plenty of Russians are poor and getting poorer.

      • It doesn't add up... permalink
        July 30, 2020 1:21 pm

        Perhaps in Soviet times the people could be fed lies and shipped to Siberia if they disagreed. Even then, back when the BBC World Service was a purveyor of enough truth to merit serious jamming efforts, the idea that life might be better elsewhere crept around. Life is different today. Those who remember the immediate post Communist era can recall a dire life for those not tied to the oligarchs, and even those who were recall the Wild West violence that accompanied their grab for wealth and power. Putin’s popularity has taken a major slide. His election as effectively president for life has more to do with fear than approval. Russians know their history. Ivan the Terrible and Boris Godunov rank alongside Stalin and Beria, now admitted to the classrooms.

  3. Robin Guenier permalink
    July 29, 2020 7:26 pm

    This is important because the EU Commission’s carbon border tax plans are a key element in its post-COVID ‘green’ plans – they’re designed to incentivise foreign exporters to the EU to go ‘green’ and to create a barrier to boost EU industry. But, if as seems likely, these plans fall foul of WTO rules, a major part of the EU’s plans for a ‘green’ future could be jeopardised. And it’s particularly interesting that Russia’s warning follows a meeting of BRICS countries. These countries – Brazil, Russia, India, China and South Africa – are not particularly interested in a ‘green’ future and are unlikely to take very kindly to EU efforts to persuade them otherwise by the imposition of these tariffs.

    It’s also most interesting that, as the article states, similar taxes are part of Biden’s plans if he triumphs in November.

    • Mack permalink
      July 30, 2020 1:26 am

      It is also interesting that, if Russia plays around with their gas pipeline switches, like they have done previously with their Ukrainian and Georgian neighbours, then German energy supplies could be in big trouble. Can get a bit chilly there in winter I believe, particularly when the bird choppers and sun hats aren’t performing to their modelled intensity.

      • Robin Guenier permalink
        July 30, 2020 7:46 am

        It’s not only Russia. This Russian comment (threat?) followed a BRICS meeting. Suppose that, despite the WTO, the EU imposes border carbon taxes and China, India and other important ‘developing’ countries retaliate by putting additional import tariffs on European luxury goods (cars for example) and on other key manufactures (such as aircraft) and by making trade difficult in other areas. The law of unintended consequences could kick in and this green initiative turn out to be extremely damaging to the EU.

        And Biden’s planning something similar. Here’s an extract from a draft of the Democratic Party’s election platform:

        ‘We will apply a carbon adjustment fee at the border to products from countries that fail to live up to their commitments under the Paris Climate Agreement because we won’t let polluters undermine American competitiveness.’

        That may turn out not to be such a good idea.

      • Robin Guenier permalink
        July 30, 2020 7:48 am

        Apologies – that final sentence was not meant to be part of the quotation.

      • It doesn't add up... permalink
        July 30, 2020 1:31 pm

        It is certainly worth noting the Russian efforts to diversify their markets. Major pipelines have been built from Siberia into China, which the Chinese are willing to subsidise if they can squeeze Europe. The ice class LNG fleet has expanded enormously, and the use of ship to ship transfer off Northern Norway has reduced the reliance on European ports either for discharge or reloading to release the tankers to return to reload in Sabetta in winter when the Artic route to China is impassable. We should remember that it was Russian LNG that averted a gas shortage in the UK in midwinter a couple of years ago, and provided the peak supply needed to get us through the Beast from the East. It’s short haul compared with US supplies, which may get stamped on by Biden.

    • July 30, 2020 11:14 am

      Robin, we’ve discussed strategy before now. May I suggest that you take a lead in a specific campaign against carbon credits, carbon borders and the like. I’ve come to realise just how fundamental this element is to the problems that we face, and yet it’s completely outside my area of expertise. For example, the Adam Smith Institute support carbon trading, and this is something we should in theory be able to challenge on economic grounds rather than trying to argue about ‘the science’.
      The carbon credits system, as far as I understand, is intended to replace the existing currency and is the basis of replacing a culture based on freedom, truth and democracy with ‘Do as we say’. Even if I’m wrong about that, the whole system, is it not, is about extracting wealth from the grassroots and placing it in the hands of people who are already wealthy.

  4. jack broughton permalink
    July 29, 2020 8:32 pm

    Interesting politics, I wonder whether LNG imports will be considered as being from a polluting country? Also, will Biden stop the US increasing exports of coal and LNG in the name of AGW, and will he tell the people that?

    I suppose that the duty propose will levy a bit more contribution to the EU from Germany as the main beneficiary.

    An amusing bit of crowing in Renewables Energy World today claimed that the US generated 25.3% of its electricity from renewables. Of course more that half of that was hydroelectric!

    • Sobaken permalink
      July 29, 2020 10:21 pm

      There’s no details on the EU commission site. I’d imagine all fossil fuel imports will be taxed. But it’s not like there’s going to be any spare LNG for Europe if Biden bans fracking, so Germany will still be pushing for NS2, as it needs it if it is to phase out coal across Europe. Gazprom is simply going to raise prices to cover the duty, though they might still lose money if consumption falls due to high prices. The bigger impact will be in oil and petroleum products (the tariff will make Arab oil more competitive compared to Russian) and steel/iron and metals refining (local European production might become cheaper than imports from China and ex-USSR countries, but I wouldn’t bet on it as EU has some fantasies about switching heavy industry to hydrogen).

      • It doesn't add up... permalink
        July 30, 2020 1:37 pm

        As some of the biggest per capita emitters on the planet, Middle Eastern countries would be hard hit by carbon taxes. Their electricity is almost exclusively powered by oil and gas, and they export little else that doesn’t embed that or cheap gas.

  5. Thomas Carr permalink
    July 29, 2020 8:48 pm

    Nothing renewable about the siltation behind some US dams which will need to be expensively cleared before the water storage capacity is seriously compromised. Alternatively the dams will be ‘written off’ and their capacity ‘renewed’ by building replacements .

    • Curious George permalink
      July 29, 2020 10:16 pm

      While windmills and solar panels last forever.

    • Nancy & John Hultquist permalink
      July 29, 2020 10:17 pm

      Many older and small dams have been removed**, and the process continues. Seems to be not a big deal, except to the new free flowing rivers. Replacements. I don’t think so.
      ** Elwha River in Olympia Nat. Park

  6. Thomas Carr permalink
    July 29, 2020 9:00 pm

    Curious George. For more on Russia go to You Tube and search for Russian Plus. Slava who has a drone also to make the recordings and his sister cover mundane matters of interest like a visit to their auntie and the auntie’s fruit bushes.
    About every week there is a new bulletin mostly in English or sometimes sub titled when Slava is imterviewing vox pop.

    • Curious George permalink
      July 29, 2020 10:13 pm

      I’ve lived there for several years. In Russia, the Truth (Pravda) is only a newspaper.

      • It doesn't add up... permalink
        July 30, 2020 1:56 pm

        As the Russian joke has it в «Правде» нет известия, в «Известиях» нет правды – there is no news in Pravda and no truth in Izvestia (the Russian makes clear the play on words).

        Pravda also means justice. Not much of that either

  7. ianprsy permalink
    July 29, 2020 11:22 pm

    You forgot to mention the corruption, Paul. As if it isn’t bad enough already.

  8. July 30, 2020 7:52 am

    If this is going to apply to German imports of Russian gas, it won’t happen.

  9. calnorth permalink
    July 30, 2020 9:25 am

    Isn’t the EU proposing an over arching green credential requirement to countries exporting to the EU. Show us your green stuff that only we can approve…or some such? They don’t seem to ever tread lightly…costly!

  10. Phoenix44 permalink
    July 30, 2020 9:39 am

    Such appalling bad economics from the EU, driven I suspect by Macron’s flimsy grasp of the subject. Making imports more expensive in order to favour domestic production simply means higher prices, lower wages and fewer jobs. That is the lesson of Comparative Advantage. But as ever, France and the EU have no interest in the way things are in reality when they can impose their own fantasies on people. The EU will stagnate further, France (sadly) will stagnate more than say Germany and people will get relatively poorer. Thank goodness we escaped by the skin of our teeth.

  11. MrGrimNasty permalink
    July 30, 2020 11:27 am

    Only a week ago the Met Office was forecasting no significant heat for the rest of July in the UK, there was the usual localized urban London warm patch with Heathrow expected to peak at perhaps 24C. Now the forecast for Friday is widespread 30C, Heathrow 36C, hottest day of year. If they can’t even get the weather approximately right a week out, how far out are their climate models!

    • July 30, 2020 11:40 am

      For once, the Daily Express was right!

    • Coeur de Lion permalink
      July 30, 2020 11:44 am

      Useful to look at Southampton 14 day forecast which takes us to mid August with temps never above 26 and mostly low twenties. So where’s our intolerable heatwave this year? I’m emailing from SW France where it’s 40 today and tomorrow then cooler. But I haven’t seen Hapless Horrorbin catching the TGV to get down here to start raving about it.

      • MrGrimNasty permalink
        July 30, 2020 1:19 pm

        Yes 1 day heatwave at end of July so far, although I’ve noticed the August outlook forecast has been edging up in warmth recently.

    • Mike Jackson permalink
      July 30, 2020 10:27 pm

      Meteo France is forecasting 40° for my neck of the woods for tomorrow. Mrs J and I are thinking of removing ourselves to the cellar with a corkscrew and a couple of jigsaw puzzles!

  12. Coeur de Lion permalink
    July 30, 2020 11:34 am

    Someone must tell the EU that carbon dioxide, not ‘carbon’, is not a threat and has a very small effect on ‘global warming’ and that weather extremes have not been caused thereby.

  13. AndyG55 permalink
    July 30, 2020 12:13 pm

    So, they are going to put a “carbon fee” on imports of Russian gas and oil.

    That will be such fun to watch.! 🙂

    • It doesn't add up... permalink
      July 30, 2020 5:01 pm

      Most countries already impose heavy duties on oil. It’s just that they are collected after refining or on release from bonded import storage, rather than at the border on import.

  14. manicbeancounter permalink
    July 30, 2020 11:17 pm

    Most people forget why Russia in particular of the BRICS is opposed to cutting emissions. It is the second largest producer of oil and natural gas behind the USA. It is also a major coal producer. However, the Russian economy in nominal terms is about 1/13 the size of the US, so fossil fuels are far more important, particularly as a source of export earnings. Without fossil fuels it would be unable to afford its vast military, diminishing it as a world power. Same goes for Saudi Arabia & Iran.

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