Senior MEP says carbon border tax money must help poor countries

Revenues from the EU’s proposed carbon tax should be used to support the decarbonization of least developed countries, a senior MEP proposed in a draft report leaked to the press on Wednesday (January 5th).

The carbon border adjustment mechanism (CBAM), which will establish a new levy on imports of iron, steel, cement, fertilizers, aluminum and electricity, is expected to provide € 1 billion per year once fully implemented.

In a draft report by the European Parliament’s Environment Committee, Dutch center-left MEP Mohammed Chahim called for the mobilization of these resources to help support climate efforts in the poorest countries.

The text excludes the granting of any exemption and, instead, it states that “financial support will be provided to support the efforts of the least developed countries to decarbonize their manufacturing industries”.

“We must prevent CBAM from affecting LDCs [least-developed countries] disproportionately. Direct exemptions, however, would be a bad signal, “Chahim tweeted on Wednesday, arguing that this mechanism should promote cooperation rather than confrontation.

He added that only trading partners with “explicit” carbon pricing policies in place would benefit from certain exemptions under the CBAM.

The report, which is a response to the European Commission proposal presented last July, is seen as a complete overhaul of the original text.

As part of the EU executive’s plan, the border carbon tax, due to come into force in 2026, will target certain goods produced in third countries with lower environmental standards.

But Chahim’s report calls for faster implementation and a wider scope of imports, with basic chemicals, polymers and hydrogen added to the list of products covered by the new tax.

Additionally, a transition period designed to help companies adjust to the system has been shortened from two to one year, and the deadline for phasing out free allowances was set at the end of 2028 – eight years earlier than in the Commission proposal.

Under the Emissions Trading System, free permits help industry, aviation and, in some countries, the power sector, to remain competitive with their country-based competitors. third.

But the commission’s plan to phase out free allowances between 2026 and 2035 has been criticized by environmental groups, who have accused the EU executive of protecting carbon-intensive industries from the “polluter pays” principle.

The acceleration of the elimination of free quotas by the end of 2028 instead of 2035 has been welcomed by NGOs, such as German Watch, which sees it “[a] a clear improvement and an important step for the transformation of the industry “.

Another important change in the report is the creation of a European CBAM Authority, which would be responsible for verified emissions declarations and certificates for importers.

According to Pierre Leturcq, political analyst at the Institute for European Environmental Policy, this proposal responds “to the risk of circumvention” arising from a decentralized system of national authorities.

This would prevent foreign companies from bringing their products to the EU market through member states whose administrations have the weakest capacity to control emissions claims, he said.

In addition to accelerating global climate action, the CBAM aims to prevent companies from shifting production to third countries with less stringent climate rules – dubbed ‘carbon leakage’.

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