EU carbon border tax will do little to cut emissions, ADB study says

A European Union strategy to impose tariffs on highcarbon imports might injure developing nations in Asia but is not likely to cause huge decreases in greenhouse gas emissions, the Asian Advancement Bank (ADB) said in a report published on Monday.

The Carbon Border Modification Mechanism (CBAM) was presented to deal with concerns that the outsourcing of production had put large parts of the EU's supply chain beyond the reach of its emissions trading plan (ETS), a scenario referred to as carbon. leakage.

It was designed to level the playing field and make foreign. providers pay the exact same carbon price as domestic ones, even if. they are not subject to an ETS or carbon tax at home.

ADB said CBAM was expected to cut Asian exports to the EU,. particularly from western and southwestern Asia, with steel from. India likewise likely to take a hit.

However any little decrease in emissions would rapidly be balanced out. by the continuing increase in carbon-intensive production. throughout Asia, and systems to share emission decrease. innovation would be more reliable, it stated.

It's in fact a relatively minimal policy at the moment,. said Neil Foster-McGregor, ADB's senior financial expert. It only. imports into the EU (and) just covers 6 sectors.

The method the scale of production is increasing, even if we. do this carbon pricing more broadly around the world, you're. still visiting increasing emissions unless we see a basic. change in production strategies, he included.

CBAM could raise around 14 billion euros ($ 15.2 billion) in. profits by 2030, and the proceeds ought to be used to provide. climate finance for developing nations to decarbonise. production, Foster-McGregor said.

Among the objectives of CBAM was to incentivise non-EU economies. to enforce stricter climate policies of their own: if exporting. countries can show that a carbon rate has currently been. paid, the CBAM levy will be reduced.

India has currently talked about the possibility of enforcing. export taxes on CBAM-covered items sold to Europe, and China. is expanding its ETS to cover exporting sectors like steel.

Both nations have been crucial of CBAM, with China. cautioning Europe not to use environment as an excuse to engage in. trade protectionism.

While CBAM works as a tariff on foreign manufacturers, it will. also raise the cost of basic materials such as steel and. fertiliser for downstream EU producers, and could even provide. them a reward to relocate more production capability overseas,. including Asia, the ADB report warned.

While there is a partial balancing out of the carbon leak. in the upstream, there could be new carbon leak downstream in. the EU ... They are shooting themselves in the foot, stated Jong. Woo Kang, another senior ADB financial expert, speaking at a briefing. on Monday.

(source: Reuters)