“Border Mechanism Protects Climate, Not the EU Industries”

We asked questions to Manuela Ripa, member of Greens/EFA (European Free Alliance) in European Parliament (EP) and also a member of the Committee on Industry, Research and Energy of EP about Carbon Border Adjustment Mechanism (CBAM) which has an immense role on cutting the emissions. She is MEP from Ecological-Democratic Party (Ökologisch-Demokratische Partei-ÖDP) from Germany in 2020 and she is working on environment, climate, biodiversity protection, animal welfare, and consumer protection.

Interview: Burcu GENÇ

As you know, the European Union (EU) will apply a Carbon Border Adjustment Mechanism for countries that don’t ratify the Paris Agreement and for the carbon-dense sectors. There is a debate going on about this mechanism as it doesn’t fit World Trade Organization (WTO) non-discrimination principles. What are the latest discussions in the Parliament? And do you think if these discussions will end up supplying a positive impact on carbon reduction?

Portrait of Manuela Ripa, European Union / EP / 2020 / Benoit Bourgeois

From the beginning, we set out to introduce measures that reduce any carbon leakage through international trade in line with WTO rules. Considering that around 20% of the EU’s emissions are imported and that the EU wants to be climate neutral by 2050, this is a very pressing subject.

The EU’s Emission Trading System (ETS) failed to effectively integrate the costs that derive from CO₂ emissions into the value chain. So yes, I do strongly believe that applying a Carbon Border Adjustment Mechanism to international trade and sectors that are emission-intense -for example steel or cement- would change that. The EU is a trade and economic powerhouse and ensuring that we don’t leak carbon through environmentally weak trade policies is crucial to tackling the global climate crisis. CBAM is a key element to achieve that.

In this discussion, it’s important to note that an effective CBAM and WTO compatibility are not mutually exclusive: It is not a question of if CBAM would be compatible, but how it would be. The biggest concerns regarding WTO compatibility are, as rightly mentioned, the non-discrimination principles. CBAM addresses this concern, firstly by being based on the principles of climate protection and not by the principles of protecting EU industries. CBAM would not qualify for protectionism, as it is serving a global common good, namely the reduction of greenhouse gas emissions. As this is the global standard, it is not about protecting European industries anymore.

Therefore, EU-based and non-EU-based companies will be treated alike, also under consideration of any other similar mechanism, a third country might have in place to make their trade practices more environmentally friendly. This way, CBAM does not discriminate against third countries and is in line with “the most favored nation” principle.

In March, the Parliament adopted the resolution on a WTO-compatible CBAM, and the file is now on its way through the Commission and the Council for the next steps of the legislative process.

Do you think that CBAM would affect dumping?

CBAM will prevent the effect that cheap production from third countries, with low environmental standards, will have a competitive advantage over countries and companies that produce and trade in a more environmentally friendly way, which often comes with a bigger price tag. By internalizing the external costs that cheap steel or cement production would for example evoke, CBAM levels the playing field and takes away the incentive for dumping prices in trade and production: Simply because it’s not going to be cheaper anymore to import cheap steel.

Even though Parliament voted for the %60 carbon reduction target, EU leaders decided for %55. Do you think that this target is ambitious enough or EU can do more?

The actual target is even lower than 55%. The Member States agreed on 55% “net reduction”, which considers carbon sinks like forests and peatlands in their calculation. What they refuse to see is, however, that available carbon sinks are continuously decreasing -also due to the deteriorating climate crisis-. This means their calculation is flawed and the actual target stands at 52.8%. Far too low, according to the Parliament and leading scientists on the matter. So, no, I don’t think this target is ambitious enough and the EU definitely has to do more! My group in the Parliament even demanded a reduction of 65%. Ambitious, yes, but a 65% reduction would give us a 66% chance to reach the Paris Agreement and stay below 1.5 degrees. With a reduction of 52,8% as it is now, we have a 50/50 chance to stay below 2 degrees. When you think about the dramatic repercussions a temperature rise of already 2 degrees would have on this planet and the people living on it, taking a 50/50 chance is unacceptable.

Many countries and many brands have already made carbon-neutrality commitments. But experts say that these are not enough, and the committers still haven’t given a proper guideline with concrete actions lists. What are your visions and recommendations about the future of these commitments? 

I think that the effectiveness and enforceability of sustainability standards in trade are key. For example, a European company could market cement as a European, climate-friendly product if the last production step happened in the EU under environmentally friendly conditions. This last production step might in fact happen without much carbon emission, but this doesn’t help us at all if the upstream product -meaning the material imported into the EU to allow for this last low-emission production step- was in turn produced with high emission levels. What I want to say is: The whole life cycle of the product has to be sustainable, right from the beginning. Therefore, we need to understand how much of the CO₂ is hidden in such a good or service. This is why we need to develop a standard for the tracing and tracking of carbon content in products. The EU could develop this standard with a clear vision to make it compatible also on a global level. It’s also a way to incentivize climate action both within our EU territory but also by our trading partners.

Moreover, Trade and Sustainability Goals in Free Trade Agreements (FTAs) should be a binding and enforceable centerpiece of any trade agreement the EU ratifies. And not just a weak annex that falls out of any enforcement mechanism like in the case with previous FTAs.

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