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EuropePoor countries in line to receive funds from EU carbon border levy

Poor countries in line to receive funds from EU carbon border levy

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The future carbon border adjustment mechanism is part of the “new own resources” for the EU budget and must be used to “combat global warming” across the world, Green MEP Yannick Jadot said on Wednesday (3 March). EURACTIV France reports.

Jadot, a French Green MEP who is in charge of the European Parliament’s report on the EU’s upcoming carbon border charge, says the levy is “not a protectionist measure” to shield Europe’s industry from competition.

To ensure the upcoming border levy is compatible with World Trade Organisation rules, he insists that part of the revenue is allocated to finance low-carbon technologies in developing countries.

Jadot’s report will be presented to the European Parliament on Monday (8 March) and voted the following day.

Part of the revenue – “between €5 and €14 billion per year” – should go to the world’s most vulnerable countries, according to the Green MEP.

As of 2023, the carbon border adjustment mechanism intends to first cover carbon emissions from “energy-intensive steel, cement and aluminium industries, the power sector and the plastics, chemicals, and fertiliser industries,” Jadot said.

According to estimates, this would correspond to 94% of Europe’s industrial emissions.

How the EU decides to use the revenues generated from the levy will play a big part in its compatibility with international trade rules. In January, WTO deputy director general Alan Wolff suggested it “might be just fine” to redirect the revenues in support of the EU’s green policies – so-called recycling.

“Recycling for general environmental purposes – not for a particular sector, not directly changing the competitive environment internationally – might be just fine,” said Wolff, adding that it was “of course no problem” if those duties “go back into general revenues to support the EU in general”.

The WTO deputy director general did, however, warn that “if they come back and change the competitive equation for a particular industry or companies,” this would probably create “quite a lot of conflict.”

This fear is shared by Pascal Canfin, a French MEP who chairs the European Parliament’s environment committee. Back in December, he said that If the proceeds only go towards the EU recovery plan, “without traceability, with no environmental objectives and without any returns to certain countries, especially the poorest, I think we have to be concerned.”

“WTO compatibility is a total red line,” he added.

A number of developing countries in Africa and elsewhere have expressed concern that they will be liable to pay the levy despite having far lower carbon emissions than the EU.

But while the exact amount has not yet been fixed, Jadot said it was already clear that developing countries will benefit from a share of the revenue, in what he called a “historic position of the European parliament”.

Meanwhile, other parts of the revenue should be used to repay Europe’s public debt and the loans linked to the EU recovery plan, even if “it would be primarily to finance the green part of the recovery plan”, Canfin added.

[Edited by Frédéric Simon and Benjamin Fox]

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