Press play to listen to this article
Mujtaba Rahman is the head of Eurasia Group’s Europe practice and the author of POLITICO’s Beyond the Bubble column. He tweets at @Mij_Europe.
U.S. President Joe Biden’s “Earth Summit” marks an important moment in the green calendar. The virtual discussion among 40 world leaders will give big greenhouse gas emitters like the United States and China a chance to showcase their diplomatic efforts ahead of the pivotal delayed COP26 climate change summit in Glasgow in November.
And yet, behind the fanfare, there’s an item that leaders won’t be discussing that may be just as important to the effort to rein in global emissions. An important shift is underway within the European Union — arguably the world’s leading voice on climate issues. Unfortunately, it’s unlikely to be a change that bodes well for global action on the climate front.
In June, the European Commission will publish its long-awaited proposal for what is euphemistically described as a “carbon border adjustment mechanism.” Its final design is yet to be agreed, but the “adjustment mechanism” will either take the form of a tax that non-EU exporters are forced to pay if their products do not meet certain sustainability criteria, or else be linked to the EU’s emissions trading system. The latter strategy would potentially force domestic producers to buy pollution permits, should they wish to import goods into the EU with a carbon-heavy footprint.
All governments in Europe are to varying degrees in favor of developing a carbon border mechanism. What is new is the notable and growing differences over how it should be deployed — particularly between France and Germany.
The disagreement is less about the form of the mechanism than over how and under what conditions it should be used. Germany is no longer keen on implementing such a mechanism unilaterally. Instead, it wants it withheld as a “nuclear option” to try to force the hand of other large emitters to adopt more ambitious and binding climate targets.
The advisory board to Germany’s Federal Ministry for Economic Affairs and Energy, the BMWi, has warned that unilaterally deploying a carbon adjustment mechanism on imports will not be as effective as building a so-called climate club with big emitters like China and the U.S.
The BMWi advisers, who exert substantial influence over the ministry and will be key in determining Germany’s position at the European level, argue that diplomatic efforts to set common emission reduction goals should be prioritized over a punitive measure targeting emissions-intensive exports.
Germany’s looming elections will of course dictate the German government’s green policies for the foreseeable future, especially given that the Green Party is on an upward trend and is likely to enter — if not lead — the coalition government that emerges after September’s vote. Yet when it comes to a carbon adjustment, the Greens have already indicated that they would prefer to develop a mechanism alongside the U.S., as part of a renewed transatlantic relationship.
In the opposite corner in the EU is France, one of nine member countries that have called on the Commission not to deviate from its course, to issue its proposal on time and implement it unilaterally if other big emitters do not play ball. The French are well-placed to have a substantial impact on the debate, as Paris will take over the running of the rotating EU presidency in January 2022. It’s likely that negotiations over the adjustment mechanism will conclude during France’s six-month stint or that France will at least be leading talks when some of the more difficult aspects of the proposal come onto the table.
And yet, with Germany softening its position, Paris is unlikely to get its way. That Brussels will slap charges on imports anytime soon now looks extremely unlikely.
Climate campaigners will take heart in the fact that Brussels won’t take the adjustment mechanism off the table. On the contrary, there’s every indication it plans to use it as leverage. Climate Commissioner Frans Timmermans has repeatedly insisted he will “not hesitate” to use it if his services advise it. Senior EU officials also argue that the mere threat of a border tax is already having an effect on global policies — the raison d’être of EU climate policy.
Japan, another large emitter, has started consultations on setting up its own mechanism, admitting that the EU’s lead on the issue has forced the government’s hand. Russia, a likely target, has also already advised large multinationals to start preparing for extra import charges and is assessing what increased climate measures look like at home.
But the trouble with using a weapon as a threat is that others might see through your bluff. Previous efforts by the EU to push other countries to follow its example lacked the bite needed to convince the likes of Beijing or Moscow to change policy direction.
For now, the EU has Beijing’s attention. Chinese President Xi Jinping recently raged against the EU’s carbon border plans, urging Brussels not to use climate policies as “an excuse for geopolitics.” Whether this would continue to be the case if the EU effectively removed its loaded gun from the table remains to be seen.
Climate is one of the few areas where the EU punches above its weight. Its decision to go net-zero by 2050 is rightfully seen as a pioneering move. The next level, convincing or even forcing emitters to follow through with their green pledges, has to be backed up by a willingness to act — not just talk.
Developing an effective climate weapon, in the form of the adjustment mechanism, and loading it with the powerful ammunition provided by the EU single market is a smart way to go. Refusing to use it would waste a golden opportunity and undermine the EU in the one area it can credibly claim to be leading from the front.