Europe Launches a Carbon Tax Assault In opposition to the US Financial system • Watts Up With That?

Essay by Eric Worrall

This new carbon tax is a slap in the face for every non-EU nation which has contributed to Europe’s attempts to contain Russia.

Europe takes climate fight global as carbon border tax goes live

The Carbon Border Adjustment Mechanism enters a trial phase on Sunday.

OCTOBER 1, 2023 12:16 PM CET

The EU’s effort to become climate neutral is kicking into high gear — as of Sunday the bloc’s carbon border tax enters a trial period, which is likely to raise tensions with key trading partners. 

The Carbon Border Adjustment Mechanism — or CBAM — was adopted last year with the aim of ensuring that goods manufactured in Europe, and subject to the EU’s Emissions Trading System, which sets a price on carbon emitted, will be able to withstand competition from products made in countries where polluting doesn’t come with the same price attached.

Starting October 1, the EU’s trading partners will have to report the greenhouse gas emissions tied to their exports of iron, steel, cement, aluminum, fertilizer, hydrogen and electricity.

Initially, the requirement is just to report the emissions — although companies failing to do so face fines — the actual payments go into effect in 2026.

The point of the exercise is to both shield EU companies from unfair completion and to nudge other countries into setting their own price on carbon. Non-EU producers can deduct the cost of CBAM if they have their own domestic carbon tax.

Australia has slammed the planned carbon border levy for harming global growth, while the U.S., which has no national carbon price, is seeking an exemption.

There is particular concern about the impact of CBAM on the U.K. The price of its own emissions trading scheme has collapsed to less than half the level of the EU ETS, meaning British exporters are likely to have to pay hefty fees to the EU.

Ukrainian businesses, however, will be exempted because of the war. A European Commission official confirmed that the legislation contains a “provision to tackle exceptional and unprovoked situations with destructive consequences on the economic and industrial infrastructure in a given country.”

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The import carbon tax is an attempt to mitigate the economic devastation caused by Europe’s obsession with unaffordable green energy.

The EU has a big problem with “carbon leakage” – companies fleeing the EU, because skyrocketing energy prices are destroying their ability to compete.

But instead of responding sensibly and fixing the problem by ditching renewables, the EU plan is to try to estimate what imports would have cost had they been manufactured in Europe, and to push up the effective manufacturing cost of those imports by imposing a carbon tax.

The word which comes to mind is “arbitrary”. Even if some nations make efforts to comply by imposing their own carbon pricing regimes, there is no guarantee the European Union will properly account for those efforts in their calculations.

The Ukraine exemption could hit US farmers particularly hard. Ukraine is a major exporter of wheat and other agricultural produce. An exemption for Ukraine from Europe’s new carbon tax, along with massive direct US subsidies for Ukrainian businesses, could significantly impact US agricultural exports to Europe.

EU leaders are only thinking of themselves, they are not acting like friends and allies. They don’t care that this new tax will hurt the economies of their trading partners.

On one hand Europe keeps begging for military aid from the USA and the global community, trusting to the generosity of others to support them in their hour of need, yet at the same time the EU’s climate obsession has driven them to launch a brazen attack against the prosperity of everyone who trades with Europe.

Even though the import tax payments don’t start until 2026, the promise and preparation for taxes is likely to have an immediate chilling effect on the profits of US and other businesses which export to the European Union.

Imagine trying to get a business finance loan to expand your export business, with the threat of escalating carbon taxes hanging over your bottom line? Even if the USA and Australia win exemptions, at most they would be a temporary reprieve. All long term finance deals will be impacted, as will the bottom lines and financial prospects of any business which exports to the European Union.


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