Press Release

Macron pushes for carbon tax on Europe’s borders

December 04, 2017

The French president has reiterated his call for a European carbon tax on the EU’s borders to guarantee fair competition for companies taking action to reduce their climate impact. The idea – which featured in T&E’s report, Can trade and investment policy support ambitious climate action?, last month – has been gathering momentum and was previously endorsed by IMF chief Christine Lagarde and Nobel-winning economist Paul Krugman.

President Emmanuel Macron told the COP climate conference in Bonn that Europe needs a floor price on carbon – accompanied by ‘a border tax that will also protect our economic sectors against imports from countries that do not respect the same objectives and decide not to engage in this environmental transition.’

The French president previously cited such a tax in his Sorbonne speech on the future of Europe. T&E’s report with the Trade Justice Movement further fleshed out the idea for a carbon border tax adjustment (CBTA) to be based on the price of carbon in existing carbon markets such as the EU emissions trading system. It should be levied on goods and services from countries which do not put an equivalent price on carbon.

The T&E report is in response to the country-by-country approach to mitigating climate change – despite the exponential growth in the global flows of goods and capital across borders. It calls for a new set of tools and strategies to address the significant increase in emissions resulting from this growth in trade.

T&E’s better trade and regulation director, Cécile Toubeau, said: “The onus is on countries with the resources and technical capacity to adopt domestic measures necessary to avert dangerous climate change. The carbon border tax adjustment can level the playing field between entities inside and outside developing countries taking action on climate change.”

Countries should also levy a carbon tax on foreign direct investment (FDI) income derived from coal, oil and gas extraction, the report recommends. Countries – especially those that position themselves as climate leaders – should have to account for the carbon intensity of their trade. In 2014, Dutch, British and Norwegian companies earned €48 billion on outward FDI from oil and gas. Meanwhile, these and other developed countries have committed to support developing countries in reducing their emissions. Companies in developed countries should have to report and pay a tax on carbon dioxide equivalent to emissions associated with their FDI income, the report says.

Paul Keenlyside, who authored the report on behalf of the Trade Justice Movement and T&E, said:“Every year, huge outward investments flow from developed countries to oil, coal and gas production overseas. Yet almost every developed country has pledged to support low-carbon development internationally. A tax on FDI incomes from fossil fuels would acknowledge this contradiction and provide climate mitigation finance to developing countries who need it to grow in a less carbon-intensive way.”

The report also recommends that finances raised from a CBTA or a tax on FDI income could be set aside to help properly resource existing climate funds which support adaptation and mitigation measures in low-income countries.