WTO to work with Europeans on legality of EU carbon tax plan

The World Trade Organization will work with a number of European countries to ensure a proposed EU carbon tax will respect international trade rules, the WTO and France said Thursday.

French Finance Minister Bruno Le Maire and the WTO’s new leader Ngozi Okonjo-Iweala told a press conference in Geneva that they would set up a working group to examine the proposed carbon border tax.

The tax plan, which is still in the early planning phases, would be aimed at shielding EU companies against cheaper imports from countries with weaker climate policies.

Le Maire said the working group being set up between the WTO and a number of European countries would mull “how to ensure that this mechanism conforms with WTO rules and how to guarantee a fair transition for developing countries.”

France, which takes over the European Union’s rotating presidency next January, was intent on ensuring that the new mechanism “respects WTO rules”, he said.

“We cannot on one side support trade multilateralism and on the other not respect its rules.” 

– ‘Fair and justifiable’ –

Okonjo-Iweala stressed the need to ensure that the Europeans create “something that is fair and justifiable.”

The working group would help “make sure that we don’t come up with a mechanism that either is discriminatory or protecting domestic producers against others, or disadvantaging domestic producers against others,” she told the press conference.

“We should also make sure that those least-developed countries and other developing countries do no perceive this as a mechanism designed to either disadvantage them (or) disadvantage their development,” she insisted.

“The entire world has agreed that there must be a just transition involving countries that are developing. They should not be disadvantaged by climate measures.”

The European Parliament earlier this month overwhelmingly endorsed the creation of the carbon border tax.

But the non-binding vote was an early step in a long path to setting up the tax plan, which faces a very difficult ratification with opinions widely diverged among the bloc’s 27 member states.

The proposed tax is seen as a key part of the EU’s Green Deal, an ambitious push to achieve carbon neutrality by 2050 and meet the targets of the Paris Climate Agreement.

The mechanism is intended to make sure that imports from outside Europe do not have an unfair advantage if manufactured with a bigger carbon footprint.

The concern is greatest for heavy industry such as steel-making, where European countries face tough competition from cheaper Chinese imports that are made with lower environmental standards.

Le Maire said Thursday that to begin with at least, the only industries affected would be steel and cement production, which entail huge amounts of greenhouse gas emissions.