The EU carbon tax could create a new era of trade wars

Europe’s carbon border levy to increase the cost of CO2-intensive goods entering the EU could push the Global South towards less restrictive trade deals, ultimately causing more harm to the environment, writes Muhammed Magassy.

Muhammed Magassy is a Member of Parliament for ECOWAS (The Economic Community of West African States), an economic union comprised of 15 African Countries, and a member of The Gambia’s National Assembly. 

Europe has the moral stature, the economic strength, and the scientific sophistication to lead the world fight against climate change. But for Europe to do so, for Europe to be taken seriously and set a global pace, it must listen to the developing world. It must understand our concerns, and incorporate our realities and possibilities into its own decisions.

In the spirit of making that possible, I would like to share concerns that may not be heard in European corridors of power, concerns that are vital to understand if we are to save our planet. These concerns can be better understood through the example of Europe’s carbon tax, as well as similar, previous decisions, and their unintended impacts.

Europe’s carbon tax, the Carbon Border Adjustment Mechanism (CBAM), is intended to target products with significant carbon footprints. Unfortunately, the implementation of this tax would have the effect of punishing developing countries, even driving them into environmentally harmful practices.

A policy that was designed to save the planet could accelerate its destruction.

While it is worth noting Washington has declined to endorse CBAM, I am – for understandable reasons – more concerned with the effect it could have on my country, my region, and the broader Global South we are a part of. That is because CBAM punishes countries that fail to meet the standards set in the European Green Deal.

But the requirements of the European Green Deal have been designed for wealthy, developed economies, not for nations that have few economic lifelines other than the products Europe is so concerned by.

By pushing the Global South towards unrealistic standards, Europe will only push the Global South into less restrictive trade deals – deals that do not reward or incentivise environmental progress.

It is not hard to imagine the Global South, forced out of European markets, will redirect its production to countries and regions where the environmental standards are more flexible. Emerging economies would then find themselves trapped in economic and environmental ghettos, where avoiding mass impoverishment also means navigating the severest effects of climate change.

CBAM would also reverse any progress made, penalising developing countries that have made the brave and necessary decision to pursue environmental standards on their own initiative.

For example, Europe has decided to ban palm oil as a biofuel because, as Europe understands it, palm oil is an unsustainable forest-risk commodity that contributes to deforestation. But the reality of palm oil is far more complex – and far more optimistic.

Malaysia is one of the world’s leading palm oil producers. It is also one of the leaders in sustainable palm oil. The Malaysian Sustainable Palm Oil (MSPO) scheme is a national metric, with legal force behind it, that has brought about impressive results.

As of now, almost 90% of Malaysian palm oil production is sustainable. This drive towards sustainability has had significant impacts. For one thing, a study by the World Resources Institute finds that deforestation in Malaysia has annually decreased since 2016.

But rather than notice this progress, support this progress, and open its markets to sustainable palm oil, Europe has decided to ban the forest-risk commodity altogether. From the perspective of the Global South, who is to say CBAM will operate any differently? What is the point of pursuing realistic (and expensive) standards of sustainability if these will never be accepted?

Even powerful and wealthy countries, like China and Australia, are considering turning to the WTO in response to European moves. That is to say nothing of how CBAM, like the palm oil ban before it, could drive developing nations away from practical standards of sustainability and towards more environmentally harmful outcomes.

But as I indicated earlier, my interest is not only in drawing attention to what the European Union is doing wrong, but in pointing out what it could do right. The United Kingdom’s Environment Bill provides an example of how the developed world could work with the developing world – instead of penalising it.

The Environment Bill stipulates that British industries prove imported commodities are produced in accordance with the laws of the countries they originated in. That would mean, for example, that if a British cosmetics company used Malaysian palm oil in its products, it would have to prove that palm oil meets MSPO standards.

This approach is superior because it acknowledges that the Global South has an interest in fighting climate change, understands its abilities to move its economies towards greater sustainability, and requires access to developed markets not only to sustain its livelihoods but to make future environmental progress possible.

I invite leaders in the European Union to closely consider these concerns, closely study the British Environment Bill, closely examine the impacts of the ban on palm oil, and resolve to fight climate change in concert with the Global South, not by ignoring our legitimate concerns, reasonable fears, and greatest hopes.

Despite some unfortunate policy decisions, Europe is still a leader for the world. We look forward to working with the continent.

We in the Global South are not the problem, after all. We are part of the solution.


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