CO2 in goods and industrial competitiveness
By Agime Gerbeti
Europe is destined to be a market, it has to be an intelligent market, one that
rewards local and imported products sharing the same values that Europe has
auto-imposed”, Cap. 7.
ETS applied both at State and industry level is an extraordinary mechanism. It is a first experiment to achieve environmental and common energy objectives within the EU. The emission reduction objectives has stimulated the generation of renewables, energy efficiency and a low carbon culture, making the European industry competitive - worldwide - as a low emissions producer.
But the ETS has not achieved its goals. It was not attractive to other geographic areas and the global emissions have increased business as usual. Europe, net of the crisis, did not consume less but produced less importing goods from emerging countries with high carbon intensity; EU is, in fact, delocalizing production and its consumption. In addition, the tradable allowances reached a not at “worthy” price level to encourage research and investment. So, ETS has become some kind of (low) negotiable energy tax burden on EU business competitiveness in the global market.
The WTO (and international policies opportunities) does not allow the imposition of a carbon border tax.
This proposal is to consider, for putting into the European market, the CO2 as a raw material used in the production of goods, regardless of where they are produced. Enhance it in quantity "contained" in a single product as a result of the energy mix used. The cost of CO2 would be administered as a charge converging in VAT.
This approach allows an enhancement of CO2, which is free from the fluctuations of the market and from local production crisis, that can be set at a “worthy” level for enabling research and encourage low-carbon investments both in EU and non-EU territories. It would also create - because of the greater efficiency of the European energy mix - competitiveness in energy costs of production.
This approach - adopted also unilaterally by Europe - does not violate the rules of the WTO, as long as it allows industries outside the EU to demonstrate their energy production mix. If European standards are respected, industries would be exempted from the charge on emissions within the VAT.
In an extremely complicated context of energy and industry - US going towards energy independence thanks to shale gas; China and India are increasing their market shares; OPEC Countries are adopting “strong” international policies on cost of crude oil - Europe needs to use the advantage of the low carbon intensity of its industrial system; especially now that with the abandonment of free allocation, the system production cost will inevitably grow.
This could be a way to create conditions to lower global emissions and increase environmental benefits faster than any global agreement, (this will came surely late).
The aim is not to lower our environmental objectives but
to urge the rest of the world to follow Europe.