On May 17, 2012, the French Minister of Industrial Renewal announced plans to revive a previously discarded proposal to implement carbon tariffs on imports from countries with lenient emissions regulations. If this proposal gains support, it could have a significant impact on imports from various developing nations where environmental regulations are perceived to be less stringent.

Arnaud Montebourg, in his first interview as Minister, known for his strong anti-globalization views, stated that the European Union (EU) would have to reconsider its liberal doctrine and that it should not be forbidden to support local industries. When questioned if this meant imposing tariffs on Chinese imports, Montebourg referred to the carbon measure as an "external tax" and mentioned that the plan was already being discussed within the European Commission.

Former French President Nicolas Sarkozy had also advocated for a carbon border tariff in 2009 before the UN climate talks in Copenhagen, with the aim of preventing industries from relocating to countries with less stringent environmental laws. However, this idea was widely rejected by other EU member states as protectionist. Sweden, which held the EU presidency at the time, was concerned that such a measure might weaken Europe's negotiating position at the Copenhagen summit, and the concept was criticized by some as "eco-imperialism."

Following the failed talks in Copenhagen, France rebranded the idea as a "carbon inclusion mechanism." This mechanism would require importers to purchase pollution permits from the EU's emissions trading scheme (EU-ETS). The French government suggested that this proposal could incentivize emerging economies like India to participate in international negotiations on climate change. In 2010, the French Permanent Representation to the EU circulated a "briefing note" in Brussels to explain how this mechanism might operate.

Under the then-proposed system, emerging economies could join a partnership comprising industrial sectors facing the most foreign competition due to the EU's stringent environmental rules. Countries joining this partnership would receive an exemption from the emissions trading scheme and access to low-carbon technologies. Those refusing to join would be required to pay for EU pollution permits. Essentially, this would raise the price of any imported product to the same level as it would cost an EU producer to comply with the EU's emissions trading scheme when manufacturing the same product. To address allegations of protectionism, the French government suggested that the income generated from this mechanism could be used to fund low-carbon technologies in emerging markets.

French diplomats had defended the 2010 proposal, maintaining that the status quo rewards countries for refusing to cut emissions. One diplomat asserted that the current EU approach, which results in EU products that is comparatively more expensive, essentially tells countries, "If you dont reduce your emissions sufficiently, you will not have favourable access to the European market."


Currently, certain EU industries pay for permits to emit carbon dioxide under the EU-ETS, the emissions trading scheme. The EU is also working on a plan that would create an internal European minimum carbon tax for industries that fall outside the scheme.


Related to Arnaud Montebourgs recent statement, the French environment minister Jean-Louis Borloo has also recently stated that a properly constructed carbon tariff would not contravene international trade rules, but rather merely level the playing field.


Despite Arnaud Montebourg's strong language, one should know that there is not yet widespread support for such a proposal. EU Trade Commissioner Karel De Gucht has warned that a carbon border tax could lead to a "trade war," and EU Climate Action Commissioner Connie Hedegaard believes that an international deal on climate change, not a carbon border tax, should be the current priority. Additionally, unilateral measures such as this one have traditionally been met with strong resistance from developing countries. Climate negotiators meeting in Bonn last month stressed that this is a matter best addressed by the UN Framework Convention on Climate Change (UNFCCC).


Nevertheless, the European Commission has recently taken steps toward alleviating what it views as unfair competition in other areas. In March 2012, the Commission announced a proposal for "reciprocity" that would block non-EU companies from bidding on government contracts if EU firms continue to be overlooked by governments abroad, particularly in mainland China and the United States.


This article was originally published in the Stitch Times, July, 2012.