A European Union plan to impose tariffs on high-carbon imports might damage creating nations in Asia however is unlikely to lead to huge reductions in greenhouse fuel emissions, the Asian Development Bank (ADB) mentioned in a report revealed on Monday, February 26.
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A European Union plan to impose tariffs on high-carbon imports might damage creating nations in Asia however is unlikely to lead to huge reductions in greenhouse fuel emissions, the Asian Development Bank (ADB) mentioned in a report revealed on Monday.
The Carbon Border Adjustment Mechanism (CBAM) was launched to deal with issues that the outsourcing of producing had put giant components of the EU’s provide chain past the attain of its emissions buying and selling scheme (ETS), a state of affairs described as “carbon leakage”.
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It was designed to degree the taking part in area and make overseas suppliers pay the identical carbon worth as home ones, even when they aren’t topic to an ETS or carbon tax at house.
ADB mentioned CBAM was anticipated to cut Asian exports to the EU, significantly from western and southwestern Asia, with metal from India additionally probably to take a success.
But any small discount in emissions would rapidly be offset by the persevering with enhance in carbon-intensive manufacturing all through Asia, and mechanisms to share emission discount expertise could be more practical, it mentioned.
“It’s actually a relatively limited policy at the moment,” mentioned Neil Foster-McGregor, ADB’s senior economist. “It only imports into the EU (and) only covers six sectors.
“The approach the size of manufacturing is rising, even when we do this carbon pricing extra broadly throughout the globe, you are still going to see rising emissions except we see a elementary change in manufacturing strategies,” he added.
CBAM could raise around 14 billion euros ($15.2 billion) in revenue by 2030, and the proceeds should be used to provide climate finance for developing countries to decarbonise manufacturing, Mr. Foster-McGregor said.
One of the aims of CBAM was to incentivise non-EU economies to impose stricter climate policies of their own: if exporting nations can demonstrate that a carbon price has already been paid, the CBAM levy will be reduced.
India has already discussed the possibility of imposing export taxes on CBAM-covered products sold to Europe, and China is expanding its ETS to cover exporting sectors like steel.
Both countries have been critical of CBAM, with China warning Europe not to use climate as an excuse to engage in trade protectionism.
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While CBAM serves as a tariff on foreign producers, it will also raise the cost of raw materials such as steel and fertiliser for downstream EU manufacturers, and could even give them an incentive to relocate more production capacity overseas, including Asia, the ADB report warned.
“While there’s a partial offsetting of the carbon leakage within the upstream, there could possibly be new carbon leakage downstream within the EU … They are capturing themselves within the foot,” mentioned Jong Woo Kang, one other senior ADB economist, talking at a briefing on Monday. )
