From the GWPF
Vijay Raj, India Date: 1/14/21
The introduction of the European Union's CO2 border taxes and Joe Biden's announcement of clean energy plans have raised two alarms in developing countries.
The new Law on the Mechanism for Adjusting Carbon Frontiers (CBAM) will affect all countries that export to the EU, especially countries without carbon pricing mechanisms. Countries like India, China, Indonesia, the Philippines, and even developed countries like Australia and Poland are likely to be severely affected by the CBAM.
Climate justice and carbon taxes
The European Commission introduced the idea of CBAM in December 2019 as part of its EU Green Deal. The CBAM is expected to become a reality in 2021. However, the EU's large-scale climate sanction by the CBAM is treated with hostility in India, China and most developing countries.
Developing countries will see the CBAM as inconsistent and inconsistent with the principle of climate justice, which is recognized by the parties to the Paris Agreement, which allows developing countries to continue using fossil fuels and receive $ 100 billion a year. in climate funds.
Large developing countries like India, Brazil and China have always argued that per capita emissions in the US and the EU are much higher than in their own economies, and so have historically rejected attempts by developed countries to introduce marginal carbon taxes.
A CBAM at this point will create more friction between nations and lead to greater objections to the goals agreed under the Paris Climate Agreement.
Possible effects of CBAM and reactions in India
India has called for a legal analysis of the deal to ensure that the proposed EU and US taxes have no impact on its industry and economy.
Morgan Stanley's report predicts a carbon tax of $ 40 per tonne of emissions will increase the cost of producing aluminum in China and India by more than 20%.
In response to these taxes from the EU and the US, developing countries can introduce their own taxes to compensate for the damage from the loss of export revenues and to signal their displeasure.
India and the US, for example, were embroiled in a tax dispute during Trump's tenure in which India responded to US taxes by counteracting US imports. The EU imports a wide range of commercial and industrial products from India, including chemicals, fabrics, cement and metals, and the CBAM will affect all of these industries. The CBAM would affect most of the major industries in these sectors, with the exception of a few Indian cement manufacturers such as Dalmia Bharat and Ambuja Cements, as they have already taken measures to reduce CO2 emissions.
Biden's plans and energy use in developing countries
To make things more challenging, a similar climate policy announced by the new administration in Biden means that countries like India should also prepare for a US-influenced disruption in the fossil fuel sector.
Biden's government is likely to roll out its clean energy plan, which includes policies and measures aimed at achieving a "zero carbon electricity sector" by 2035.
The official website states that politics "will put the United States on an irreversible path to achieve net-zero economic emissions by 2050 at the latest".
It remains to be seen how this transition policy will be applied to US exports of oil, gas and coal, especially importers like India. The Trump administration was very supportive of the production and export of oil, and it is still unclear whether this will be the case during the Biden administration.
Source: US Energy Information Administration
US petroleum exports doubled between 2015 and 2019. The largest customers include developing countries such as India, Brazil and Mexico. All of these countries could find oil imports disrupted under the Biden administration.
US natural gas exports have also increased over the past three years. Among the developing countries, Mexico, India and Chile were the largest importers of US liquefied natural gas in 2019.
India in particular was heavily dependent on US oil and gas. India's LNG imports from the United States rose from around 21,000 million cubic feet in 2017 to around 92,000 million cubic feet in 2019.
A restriction on US oil and gas production by the Biden government would put the Indian oil and gas sector in trouble, especially once they have started to drift away from their traditional Middle Eastern suppliers like Iran.
However, it is quite uncertain how fossil fuel exports or trade relations will develop in the next few years. India, for example, has expressed interest in resuming oil imports from Venezuela and Iran, believing that a Biden government would ease the sanctions that are currently restricting oil exports from these countries to India.
The EU signed a major trade deal with Beijing in the final days of 2020, despite all the rhetoric surrounding CBAM and the reservations expressed by the Biden Energy team. It will give European companies better access to Chinese markets.
The EU's desire to generate financial gains through a trade deal with China, while China is actively involved in growing the fossil fuel market in Asia and Africa, shows the EU's hypocrisy when it comes to pushing the talk on carbon emissions . This makes their CBAM a hypocritical and selective policy that ignores the world's largest fossil fuel consumer.
Given the complexities of fossil fuel trade relations, the West's defiant stance on reducing fossil fuel consumption, and the EU's surprise decision to sign a major trade deal with China's largest fossil fuel consumer, it's difficult to understand the impact of CBAM and Clean predict energy plan for the entire trade.
The CBAM is likely to bring about industry-level adjustments in key fossil fuel countries such as India, which can ultimately result in impaired growth and lengthening the deadlines for achieving development goals. This will ultimately affect consumers and the economy, who are already suffering from the effects of the COVID-19 lockdown.
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