CARBON
BORDER TAX - ENVIRONMENT
News: COP27 | India, China, Brazil, South Africa oppose ‘carbon border tax’
What's
in the news?
● With the 27th edition of the Conference of Parties (COP) in Sharm El Sheikh nearing its final stages and efforts being ramped up to arrive at a conclusive agreement, a consortium of countries that includes India has jointly stated that carbon border taxes, that could result in market distortion and aggravate the trust deficit amongst parties, must be avoided.
Carbon
Border Tax:
●
Carbon border tax involves imposing an import duty on a product manufactured in a
country with more Tax climate rules than the one buying it.
●
The European
Union has proposed a policy called the Carbon Border Adjustment Mechanism -
to tax products such as cement and steel, that are extremely carbon intensive,
with effect from 2026.
○
The CBAM, it says, “will equalise the
price of carbon between domestic products and imports and ensure that the EU’s
climate objectives are not undermined by production relocating to countries
with less ambitious policies.”
●
Apart from the EU, California in the US applies charges to some imports of
electricity.
● Canada and Japan are also planning similar measures.
Objectives:
●
Some developed nations, in efforts to cut
emissions, impose high costs on carbon-intensive businesses in their own
countries.
● Businesses can potentially sidestep this simply by moving production to a country with less stringent rules, a practice called carbon leakage.
Issues:
●
While its advocates, like the EU, claim
the tax will benefit the environment
and provide a level playing field to companies, those opposing it call the tax unfair and protectionist.
● They say it puts the burden of climate compliance on developing countries, when historically, they have done much less to pollute the environment and yet are often more vulnerable to effects of climate change.
Opposition:
●
BASIC,
a group constituting Brazil, India, South Africa and China,
and therefore large economies that are significantly dependent on coal, has for
several years voiced common concerns and reiterated their right to use fossil
fuel in the interim during their countries eventual transformation to clean
energy sources.
●
Unilateral measures and discriminatory
practices, such as carbon border taxes, that could result in market distortion
and aggravate the trust deficit amongst Parties [signatory countries to the
United Nations climate agreements], must be avoided.
●
BASIC
countries call for a united solidarity response by developing countries
to any unfair shifting of responsibilities from developed to developing
countries.