The BCG study assessed the impact of a potential carbon border tax on a wide variety of industrial sectors in different countries. Many have been paying for carbon emissions since 2005 under the EU’s Emissions Trading System, and they have wanted a more level playing field against importers, especially those from nations with more lax environmental standards. A carbon tax on imports also has strong support among European manufacturers. The president of the European Commission, Ursula von der Leyan, has recently called the European Green Deal a key element of the region’s post-COVID-19 economic recovery. “Companies around the world will be compelled to manage their carbon footprints with greater urgency.”Ī carbon border tax is one of several mechanisms that the European Commission is considering as part of the European Green Deal, a bold initiative to cut greenhouse gas emissions in the EU by 50% over the next decade-compared with the current target of 40%-and make Europe the world’s first climate-neutral continent. “Whatever policy is adopted, the size and strategic importance of the EU market means its action could transform the fundamentals of global advantage,” said Johan Öberg, a BCG managing director and senior partner who coauthored the article. But the article contends that some sort of carbon-pricing mechanism is likely to be imposed on imports-and companies should prepare. The details and timing of the policy are still to be determined and must be approved by legislators. And steel that is produced in Chinese or Ukrainian mills using blast furnaces would become less competitive in the EU against steel from other countries that is made in more carbon-efficient mills. Higher prices for Russian crude oil, for example, could cause European chemical producers to import more oil from Saudi Arabia, where extraction methods leave a smaller carbon footprint. ![]() The study, which is described in an article titled “ How an EU Carbon Border Tax Could Jolt World Trade,” found that an EU carbon tax on imports could rewrite the terms of competitive advantage in one of the world’s biggest markets. The tax could slash the profits that are generated by imported materials, such as crude oil, flat-rolled steel, and wood pulp, by 10% to 65%, and the tax could impact European Union and non-EU producers of such goods as chemicals and machinery, according to new research released today by Boston Consulting Group (BCG). ![]() Technology, Media, and TelecommunicationsīOSTON-A plan that is being considered by the European Commission to tax the carbon emissions attributed to imported goods could create competitive advantages for foreign companies with small greenhouse gas footprints-and have financial repercussions for other exporters, adding to the financial strain caused by the COVID-19 crisis.
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