Not only will a border adjustment tariff likely make fossil-based power in the developed world more competitive—since it will punish similar generation in its exporter-nations—it will also disincentivise companies from moving factories/new investment to low-cost jurisdictions.
At the heart of the backlash against the ‘carbon tax’ the US and EU want to levy to discourage import of carbon-intensive goods, to push manufacturing jurisdictions into cutting emissions, is the inequity in apportioning of climate responsibilities. Indeed, it has been a leitmotif of climate action negotiation so far. So, Union environment minister Prakash Javadekar was, to an extent, right in calling such taxes unfair and iniquitous.
The EU and the US are proposing ‘carbon border adjustment tariffs’ that will apply to imports with a heavy emission trail. The UK and Canada are also reported to be discussing such measures. Javadekar, on the other hand, highlighted India’s significant investment in renewables and increasing forest cover, and the fact that the developed nations have failed to fulfil the Green Climate Fund commitments, under which developing nations were to receive $100 billion for green development by 2020. This has now been delayed to 2025.
Developed nations—the EU members, the US, Canada, the UK—have consistently failed to factor in their historical burden in climate talks and proposals for climate action. The accumulated emissions from their growth journey—vis-a-vis the Paris-accord target of under-2oC rise from pre-industrial era levels for global warming by 2100—has shrunk the emission budget for developing nations to lift their billions out of poverty. That apart, against the backdrop of the pandemic resulting in palpable insecurity of global supply chains, the so-called border adjustment tariff will also likely stall the growth of investments in jurisdictions like India and China, if not repatriate these entirely to the developed world.
Not only will a border adjustment tariff likely make fossil-based power in the developed world more competitive—since it will punish similar generation in its exporter-nations—it will also disincentivise companies from moving factories/new investment to low-cost jurisdictions. And in a double whammy, there is no clarity on when EU will end free allocation of carbon credits to its own heavily polluting industries, though it has talked about the need to end this for industries that will benefit from the carbon border adjustment mechanism. Earlier this year, the European Parliament voted to keep these allocations intact for such industries.
It is no one’s case that India and the rest of the developing world should not make efforts on green development and the entire burden should be shouldered by the developed world. But there has to be some degree of proportionality. The International Energy Agency’s recent report on what needs to be done to have ‘net zero’ emissions by 2050 shows how steep the gradient of emission reduction has to be.
As Deepak Gupta, former secretary, MNRE, has pointed out (bit.ly/2UjbhRH), global ‘net zero’ by 2050 doesn’t mean every country reaching net zero by that year; a more equitable approach would be historical emitters turning net zero much earlier to allow developing nations the carbon-space to grow and meaningfully reduce poverty. Meanwhile, the developed world will need to be more conscientious in its approach to climate action; the EU may tom-tom its European Green Deal (EGD) and talk about preserving and increasing its forest cover by keeping agricultural activity, that requires deforestation, limited. But the fact is that while European forest cover rose by 9% between 1990 and 2014, or nearly by 13 million hectares, while, globally, 11 million hectares was lost to agriculture that served the EU’s consumption needs.