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Carbon Tariffs Again in the Spotlight

Here it comes again -- talk of an EU carbon tax. This time it’s a member of the new administration of new French President Francois Hollande, namely his minister for “industrial revival,”Arnaud Montebourg, who called for carbon border tariffs in his first official interview. He seems to be following up on former President Nicholas Sarkozy’s earlier scheme to institute a carbon tariff on EU imports so that industries in the EU subject to carbon restrictions wouldn’t be disadvantaged.

But France was not alone in those earlier calls. The European Commission in 2008 considered imposing carbon taxes on goods from countries that didn’t have greenhouse gas emissions policies as stringent as the EU’s. Those countries would have had to buy permits and join the emissions trading scheme.

The U.S. also seriously flirted with enacting legislation for carbon border taxes in a huge energy-suppression cap-and-trade bill in 2009 until the summer of 2010 when the bill didn’t have enough Senate votes.

Meanwhile, another EU action against the airline industry continues to be controversial. In a protectionist approach to try to force other countries to adopt their cap-and-trade scheme, an EU directive, upheld in December 2011 by their highest court, would assess carbon taxes on full-trip emissions from airlines that take off or land in the EU.

This morning the American Enterprise Institute held a seminar discussing the airline emissions directive -- “The First Carbon Trade War? The EU vs. the World,” in which an EU representative, trade scholars and environmental policy experts offered some differing viewpoints on the implications of the EU policy. Several speakers noted that it may be possible for the International Civil Aviation Organization to come up with a global plan that would not cause trade frictions. One major point speakers made was that developing countries, especially China and India, are taking the lead on this issue against the EU. Since the directive applies equally to developed and developing countries, China has been adamant about not paying the emissions tax and has retaliated by holding up orders for airbuses from the EU manufacturers. In fact, it was reported yesterday that the EU had reached out to China in an attempt to find a compromise.

This issue could have far-reaching implications in relation to trade, sovereignty, extraterritoriality of taxation and standards.

Here and here are some earlier CEI articles on this issue.