The Deputy Director-General of the World Trade Organization (WTO), Alan Wolff (United States), reiterated, in a conference on trade and climate organised by theFrench Association of Large Companies (AFEP), that the future Carbon Border Adjustment Mechanism (CBAM) should not be used as a protectionist measure. He stressed the need to consult with trading partners in a broad and transparent manner. “Conflicts will arise, if they do not already do so. Measures taken by the European Union must be fair and well-calibrated in terms of their trade impact”, he warned.
Impact study. Several representatives of European bodies and private companies exchanged views during this conference. It marked the publication of the AFEP report on climate and trade, particularly on the CBAM. This study examines several scenarios of carbon tax measures and assesses their impact on EU trade and growth. In particular, it reveals that a Carbon Border Adjustment Mechanism would be particularly effective if coupled with subsidies to low-polluting European companies, reduced tariffs on low-carbon goods and trade agreements having a positive environmental impact. The report also suggests recycling some of the CBAM’s resources for subsidies for “clean” companies.
Criticism. On this last point, however, Benjamin Angel, from DG Taxation and Customs Union at the European Commission, stated that the Commission was not working on such a resource re-use scenario. He recalled that the Member States wanted to finance the Next Generation EU programme with their own funds, including the CBAM.
On the subject of business subsidies, several speakers, including Alan Wolff, Benjamin Angel, but also Bernd Lange (S&D, Germany), Chair of the European Parliament’s Committee on International Trade recalled the need to propose WTO-compatible measures. “ We must avoid escalation and trade war because of these measures”, he stressed.
The European Commission plans to publish its proposal for a Carbon Border Adjustment Mechanism in June 2021 and says that an entry into force in 2023 is plausible. It is currently working on two possible scenarios, one based on a real border tax, the other is closer to the Emissions Trading Scheme (ETS).
See AFEP report: https://bit.ly/3ibwbdw (Original version in French by Léa Marchal)