*[Enwl-eng] Will the EU stop its emissions leaking abroad?
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No images? Click here  The world's first carbon border tax is due to be phased in from October. Over three years, the European Union's carbon border adjustment mechanism will gradually place the same levy on greenhouse gas emissions associated with imported goods produced outside the EU as those made within the bloc. The new law is supposed to prevent firms skirting the EU's carbon tax by shifting factories overseas and exporting products back. The EU aims to eliminate this "carbon leakage" and encourage companies in Europe and abroad to adopt less polluting production methods. But academics warn it could entrench unjust trading relations and weaken the EU's poorer trading partners. You're reading the Imagine newsletter – a weekly synthesis of academic insight on solutions to climate change, brought to you by The Conversation. I'm Jack Marley, energy and environment editor. This week, we're looking at what the EU's carbon border tax might mean for the rest of the world. To emit 1 tonne of carbon dioxide within the EU, firms must pay around €80 (US$86). This is the EU's emissions trading scheme and estimates suggest it has cut emissions by more than 40% among sectors covered by it. According to Antoine Godin and Guilherme Riccioppo Magacho, economists at Agence française de développement, that includes more than 10,000 power plants and numerous steelworks, oil refineries and factories across the 27 member states plus Iceland, Liechtenstein and Norway. Under the carbon border tax, importers will be charged the same amount as domestic producers for the carbon emitted making the goods they bring into the EU. Iron, steel, cement, aluminium, fertilisers, hydrogen and electricity generation are to be the initial sectors the measure will extend to. While the policy's architects laud the carbon border tax as a chance for the EU to play "a leading role" in global climate action, others see it as an effort to protect European industries at the expense of emerging economies. "The question being raised is whether such climate action is just," says David Luke, a professor of trade policy and negotiations at the London School of Economics. In new research, Luke and fellow researchers highlight that the very industries which will shortly fall under the EU's carbon border adjustment mechanism are critical to African economies. "We conclude that the new policy will wipe out 0.91% of the continent’s combined GDP (equivalent to a fall of US$25 billion at 2021 levels of GDP)," he says. "To put this in context, the annual losses from the border tax represent, in value, three times the development cooperation budget that the EU committed to Africa in 2021." Fair for everyone? Luke found that Africa will be the region hardest hit by the border tax. Finding new export markets, like India and China, could soften the blow – but that's a tall order, he says. "Take the case of Mozambique. Our modelling found that the country is particularly exposed to the new law because of its aluminium exports to the EU while the value of its exports to China is almost negligible." The EU plans to recycle the money raised by the tax into the research and development of new technologies within Europe. That would rule out compensation for exporters, which would be one way of helping African countries weather the carbon border adjustment mechanism. Even so, the €1 billion that the tax is expected to generate would not make up for the revenue it will cost Africa, Luke says. "Africa could arguably weather the impact of the law had it been in the process of scaling up renewable energy capacity," he adds. This would help lower the emissions associated with making products in Africa by making it possible to replace coal and gas furnaces with electric and low-carbon alternatives. "Yet, to date, the continent continues to attract a mere 2% of global investments in renewable energy. The climate finance that was promised is not forthcoming. Nor has the EU itself contributed its fair share to international climate finance." Macroeconomic analyses tend to assume that all countries are generally capable of migrating from a polluting industry to a green one according to Godin and Riccioppo Magacho. This ignores the fact that some countries, including Germany and Denmark, are leading manufacturers of things like wind turbines and can respond to carbon taxes by creating jobs in these expanding domestic industries. Other countries must import these technologies while they lose their export markets. In their research, Godin and Riccioppo Magacho found that the carbon border tax could affect 6% of wage income in Moldova and Mozambique. Serbia and Bosnia Herzegovina, two European countries with significant steel industries, could suffer job losses of around 3%. The harm will be even greater in countries with threadbare social security nets like Zimbabwe, the pair say. Is it worth it? So is a carbon border tax still a good idea? To answer this question, Timothy Hamilton, an associate professor of economics at the University of Richmond, refers to a 2014 paper which reviewed economic modelling from different countries. Countries with a carbon tax but no border adjustment mechanism leaked 5% to 25% of their total emissions to other countries as firms moved elsewhere. But with a border tax, countries could increase the total amount of carbon they cut by as much as 5%, the review suggested. "Border carbon taxes don’t solve the entire problem. When climate policies in a few large countries reduce demand for products like fossil fuels, that can lower the global price of those products, which can result in more consumption elsewhere," Hamilton says. "That’s where international agreements become essential." Such agreements would need to account for the way in which trading relations emerged says Wim Carton, a professor of economics at University College Cork. "Many countries’ approaches to exports can be traced back to hub-spoke relationships established during the colonial period. Most African nations, for example, have almost exclusively focused on mass production for faraway international markets rather than developing their domestic markets." "The world needs to take steps to change this system, so that both environmental and non-environmental goods are more commonly produced closer to their consumers." Imagine is taking a brief summer hiatus and will be back at the usual time in a week or two. - Jack Marley, Environment commissioning editor Was this email forwarded to you? Join the 20,000 people who get one email every week about the most important issue of our time. Subscribe to Imagine.  EU’s carbon border tax: a new report shows Africa stands to lose US$25 billion every year The strong trade relationship with the EU means policy changes like the border tax may have disproportionately significant effects on African economies.  Is Europe’s new carbon border tax fair for everyone? Already lacking the means to decarbonise their industry or turn to greener alternatives, poor countries could also be deprived of revenues from exports to Europe.  The EU wants a carbon border tax on imports – but would it do the job officials expect? It's meant to stop what's known as 'carbon leakage' – when production moves elsewhere to avoid climate policies – but the solution has economic, legal and environmental consequences.  New deal to decarbonise shipping isn’t enough – here’s how global trade can reach net-zero A group of powerful countries have agreed 'green corridors' for emissions-free shipping by 2025, but that's not even half the battle.  ‘Green Deal’ seeks to make Europe the first climate-neutral continent by 2050 The European Commission will propose a wide-ranging 'climate law' in the next few months.  What if carbon border taxes applied to all carbon – fossil fuels, too? A new study shows what it would mean for Europe and China, and why the US might not be too excited about the idea. Latest from The Conversation on climate change
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